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Imports contract by double digits for second month in row

Trade deficit almost halved in October

Nayanima Basu  |  New Delhi 

The much-maligned against  the dollar has its own advantages. Merchandise in October surged an impressive 13.47% to $27.27 billion compared to $24.03 billion in the same month last fiscal. This was the fourth month in a row when registered a double-digit growth and highest in last two years. It was way back in October 2011 when registered higher growth rate of 23.7%.

have been rising steadily since July mainly on account of coupled with rise in demand in some of the main markets of US, Europe, as well as Africa and Southeast Asia.

This was in stark contrast to quite a dull run since the beginning of the last fiscal 2012-2013 to June this  financial  year. Last year, total registered a fall of 1.76% at $300.60 billion. Exports, then contracted in May and June  this year as well. However, a falling Rupee, which was 13% weaker against the dollar during July-October compared to a year back propelled growth rate to double digits since July.

“We are seeing consistent double-digit growth in All major sectors having significant contributions in the export market have shown positive trend … We are confident of reaching the export target (of $325 billion) this fiscal,” commerce secretary SR Rao said here today while releasing the data.

Rao said are rising on all major regions of US, Europe, Africa and ASEAN except for South Asia and Latin America, which were marginally low.

Imports, on the other hand, have been falling continuously since June this year. In October, declined to $37.82 billion, down 14.5% over $44.24 billion. This was the second month in a row when  fell by double digits.Thus, the trade balance for October stood at $10.56 billion, almost half of what it was in the same month last year at $20.21 billion, according to data released by the ministry of commerce and industry here today. Month-on month, however, it  was higher than $6.7 billion in September,  2013.

The month-on-month decline was  partly due to rise in gold in October compared to September. In October,  gold  rose to $1.3 billion compared to $0.8 billion in September. However,  gold  in October were down from  $6.8 billion a year ago.  

Rao attributed fall in gold  in September to confusion over the Reserve Bank of India's 80:20 scheme for gold that led to being held up at customs. "The reason behind fall  in gold and silver in September was confusion over 80:20 issue," Rao said. The RBI has made it mandatory that 20% of imported gold has to be exported through value addition. This is called  80:20 rule.

Total during the first seven months of the fiscal through October rose by 6.32% to $179.38 billion compared to $168.71 billion in the same period last fiscal. Cumulative stood at $270.06 billion against $280.73 billion, down 3.80% over the corresponding period last year.

Total during April-October reached $90.68 billion over $112.03 billion during the corresponding period in 2012-13. The government aims to bring down current  account  deficit, which  includes trade deficit, to $60 billion in 2013-14 against $88 billion in the previous year.

The is helping close the trade gap as outbound shipments are rising , following a long period of stagnation up to about June. Hence, it seems the depreciation has proved its merit to fight a soaring trade deficit, which, the government and Reserve Bank of India (RBI) fought hard to contain. In what was a policy decision in 1966 and in 1991, called devaluation of the rupee, is repeated this time  as a fall out of market  forces, called depreciation of the Indian currency.

According to CRISIL, have been rising due to a weak Rupee and rising global demand on the back of gradual recovery in US and Europe. A weaker rupee helps boost by raising the relative price competitiveness of Indian goods, particularly in those sectors that are not as import intensive, such as textiles and agricultural products.

The  as well as low domestic demand  are also pulling down

Non-oil in October reached $22.60 billion, which was 22.80% lower than $29.28 billion same month last year. In October, gold and silver came down by a whopping 80% to $1.37 billion compared to $6.80 billion, stated director general of foreign trade (DGFT) Anup K. Pujari.

Total non-oil during April-October reached $171.96 billion, down 7.43% compared to $185.76 billion during the same period last year.  On the other hand, total gold and silver during this period stood at $24.5 billion compared to $28.1 billion same period last year due to various curbs imposed by the government.

As a result, the non-oil, non-gold this year stood at $147.46 billion compared to $157.66 billion, down by 6.46%.

Thus, one can then say that a lot of import substitution has taken place due to a weaker Rupee. However, it also points to lack of demand for these products in the country. This is buttressed by the fact that industrial growth stood at just 0.1%  in the first five months of the current financial year despite  the low base  of 0.2%  in the corresponding period of  last financial  year.  

Oil imports, on the other hand, reached $15.21 billion in October this year, up 1.7% compared to $14.95 billion last year same month. Total oil till October grew by 3.3% at $98 billion as against $94.9 billion, according to the data.

International price trends are also partly responsible. The crude oil prices fell to $103 per barrel last week, which was the lowest in last four months. Similarly, coal prices hit a low of $76.45 a tonne this year on July 10, but since then it has risen by 6.5%.

In October of agricultural products, engineering goods and electronics showed healthy growth.

“While have shown a convincing rebound, the tempo can be sustained and improved by further making Indian products competitive in the global market where green shoots are visible. The Finance Ministry should immediately address the issue of duty drawbacks,” said Anupam Shah, chairman, Engineering Promotion Council (EEPC).

The Federation of Indian Export Organisations (FIEO) projected the to be in the range of $140 billion this fiscal, which it said will also ease pressure on the current account deficit (CAD) by bringing it down to $50 billion in 2013-2014.

First Published: Mon, November 11 2013. 21:09 IST