Feb trade deficit dips to 5-month low amid fears of global trade war

February imports increased 10.4% to $37.8 bn; January trade deficit was $16.3 bn

Country's trade deficit narrowed to $12 billion in February, its lowest in five months, amid concern that a global trade war could hit its exports because of US President Donald Trump's decision to hike import taxes on steel and aluminum.

Merchandise exports are expected to touch $300 billion in the current fiscal year ending this month compared with $275.8 billion, mainly driven by a rise in commodity prices and strong demand in the US and Europe.

February merchandise exports were $25.8 billion while imports were $37.8 billion, Rita Teaotia, a top trade ministry official, told reporters on Thursday.

In the first 11 months of the fiscal year merchandise exports were up 11% to $273.7 billion from a year ago while imports rose 21% to $416.9 billion, she said.

New Delhi is worried that its exports could be hit in the coming months by Trump's decision to impose tariffs of 25% on steel and 10% on aluminum.

Prime Minister Narendra Modi is hosting a mini-ministerial meeting of members of the World Trade Organisation next week expected to discuss the impact of Trump's decision.

India's trade secretary said the country is disappointed by the US decision as it is against WTO rules.

The United States has launched a challenge to India's export subsidies at the WTO on Wednesday, saying they hurt U.S. companies by letting Indian exporters sell goods more cheaply.

Teaotia said India would engage with Washington to address its concerns, though the country believed that under the current WTO rules it could get exemptions for eight years.

"India and the US are friendly countries and we do not consider it as the beginning of a trade war," she said.

Some exporters said it was unclear whether under the current WTO rules India could get exemption on the payment of export subsidies the U.S. estimates at $7 billion per year.

"India's exports could face a serious problem if the issue of export subsidies is not settled," said Ajay Sahai, director general of Federation of Indian Export Organisations.