Explained in 8 charts: How India fared on the trade front in FY19

As imports moderated faster than exports, it helped restrict growth in the trade deficit

India’s foreign trade moderated towards the end of FY19. It prompted the monetary policy committee of the Reserve Bank of India to send a worry signal in its April meeting. 

But as imports moderated faster than exports, as Chart 1 shows, it helped restrict growth in the trade deficit, reveals Chart 2. Growth in imports dropped from 21 per cent in FY18 to 9 per cent in FY19.  

While non-oil and non-gems and jewellery exports grew as fast as overall exports, non-oil non-gold imports grew slower than overall imports in FY19, as Chart 3 indicates. Chart 4 further corroborates this, showing that gold imports grew by a staggering 31 per cent in March 2019.

But if we look at the monthly data on trade, a clear moderation is seen in the second half of FY19, when trade grew in single digits. But more prominently, imports contracted by more than 4 per cent in February 2019, strongest in the financial year, shows Chart 5.

This had a positive impact on the current account deficit, which is estimated to get restricted to 1.2 per cent of gross domestic product (GDP) in Q4 FY19, from nearly touching 3 per cent in Q2, as demonstrated by Chart 6.

Chart 7 shows that the rupee strengthened along the fourth quarter, the period in which India experienced a net inflow of foreign capital. Protectionism has been cited as a top concern by global agencies. Chart 8 shows how the share of duty-free imports reduced, while average import duty rose in India and China over time.

 

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Compiled by BS Research Bureau