High trade deficit dampens cheer over exports growth

Record trade deficit of $185 billion would put pressure on CAD

Difficult conditions in the US and the euro zone notwithstanding, India managed to cross the target of $300 billion for merchandise exports in the previous financial year. However, the trade deficit widened to a record $185 billion, which in turn would widen the current account deficit (CAD).

Exports saw a robust performance, primarily owing to the engineering, gems and jewellery, textiles, chemicals and pharmaceuticals segments. But economists feel the outlook for exports this financial year is bleak due to the high base effect in the initial months of the previous financial year, as well as the slow global recovery.

“I am happy to announce India’s exports have crossed $300 billion in the last financial year,” said commerce and industry minister Anand Sharma.

This would mean an export growth of at least 22 per cent in 2011-12 over the previous year.

Imports grew at a higher rate compared to exports, rising to $485 billion in 2011-12, a growth of 38.25 per cent. This was primarily because of the high prices of petroleum, gold and silver.