Commodity import bill to drop by $60 bn
Falling commodity prices globally have brought some good news for India’s policy makers. Due to the fall in crude oil prices and the import duty increase on gold and polished diamonds, India’s import bill for the current financial year is expected to come down by about $60 billion or 12.27 per cent. India’s import of crude oil and petroleum products in 2011-12 is estimated to have happened at an average price of $112 a barrel. Prices are currently $90-91 a barrel, a fall of about 20 per cent. According to data compiled by Icra, a rating agency, crude oil imports for 2011-12 were $155.6 billion.
Rahul Prithiani, director, CRISIL Research, said, “The HPCL, MRPL, Essar Oil and Mittal-Bhatinda refineries are in expansion mode and their demand for crude oil is going up. We expect the crude oil demand to go up seven per cent.” Even with increased demand, if the import requirements for the rest of the year are locked at the current price, the bill in dollar terms could come down by around $25 billion. Last year, India imported chemicals worth $36.5 billion. Their prices have come down globally. That could save another $4-5 billion.
India’s gold and silver imports were $61.5 billion last year. With the rupee having depreciated about 25 per cent in a year and the government having increased the import duty to four per cent, domestic gold prices have risen sharply despite international prices having corrected. India’s gold import bill in April and May this year came down to $4.3 billion, compared to $9.2 billion in the same period last year. Most players in the bullion market agree gold imports are likely to be lower this year by 35-40 per cent. At this rate, the import bill for gold and silver is expected to be below $40 billion.
According the Gem and Jewellery Export Promotion Council, India’s imports of polished diamonds in 2011-12 were $14.4 billion but after the imposition of two per cent import duty in mid-March, imports have already started falling. In April and May this year, they were down to $550 million compared to $3.1 billion in the year-ago period. The year’s import bill on this head is expected to be lower by $11-12 billion.
Madan Sabnavis, chief economist at CARE, a Mumbai-based rating agency, says, “Crude oil and gold-silver account for over 50 per cent of India’s import bill. The overall import bill is likely to be lower by over $60 billion this year.”