Sharp rise in non-oil imports exerting pressure on India's trade imbalance: ASSOCHAM

It is not only crude oil which is exerting pressure on India's import bill and consequently on the current account deficit and the rupee, but a host of other non-oil items like coal, electronics, chemicals and leather and leather products, fruits and vegetables are witnessing rising imports and becoming a drag on the country's overall balance of trade situation , an ASSOCHAM analysis has noted.

"While there is no alternative to crude oil and gold imports, domestic supply constraints have led to an increase in imports by well over the double digit in as many as 22 (other than crude and gold) out of 30 top import items," the chamber noted from the latest July data.

 

"It is given that crude oil and gold and to an extent essential chemicals, and select electronic items do not have any domestic alternative and therefore, their imports are unavoidable. But close to 60 per cent rise in imports of fruits and vegetables from USD 98.67 million in July 2017 to USD 157.47 million in July, 2018 can surely be reduced, if not eliminated by improving domestic productivity and quality. Same is true about coal, coke and briquettes which have witnessed a runaway upward movement in imports for the month under review, from USD 1.54 billion to USD 2.05 billion. Likewise, imports of leather and leather products saw a rise of over 22 per cent from USD 79.66 million to USD 97.54 million, while electrical and non-electrical machinery witnessed a 30.59 per jump in imports from USD 2.4 billion to USD 3.15 billion.

"This also shows that there is a good amount of demand for all these products which is leading to a sharp rise in imports as domestic supply constraints have surfaced," the ASSOCHAM analysis pointed out.

It said while it is true that a huge amount of import pressure is on account of crude oil which has seen a rise of 57 per cent in the import bill in July, 2018 to USD 12.34 billion from USD 7.84 billion in the comparable month of the previous year, a fair bit of pressure is also seen with regard to import of iron and steel (up 20 per cent) and non-ferrous metals (up 29 per cent).

No wonder the trade balance in July, 2018 worsened to USD 18 billion from USD 11.45 billion a year ago. "Surely, a well - coordinated effort is needed, which can reduce India's import bill, while continuous measures are required to ramp up exports. Removing domestic supply constraints should not be construed as import substitution in the traditional sense of the word. These imports can create both cause and effect on the sliding rupee".

Rupee is trading above the 70 mark to a dollar, while the country's current account deficit is getting close to two per cent of the GDP, causing concern over the macro situation. "A close eye is needed on the imports situation, especially of non-oil items and domestic production needs to be ramped up,".

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