Imports contract 32% in March

Estimates show imports at $16.05 bn over $23.57 bn in the year-ago month.

Falling commodity prices and weak demand for foreign goods have resulted in a record drop in imports during March 2009.

Quick estimates available with the commerce ministry suggest imports contracted 32 per cent and stood at $16.05 billion, compared with $23.57 billion in the year ago month.

Economists expect imports to shrink in the coming months as domestic industries adjust their purchases to falling demand for their products.

Imports have been contracting since January 2009 due to a waning demand in the domestic economy as well as falling crude oil prices. The last time one saw a fall in imports for three consecutive months was in the September-November, 2001, period.

In value terms, the quick estimates on imports for the month under consideration are the lowest since January 2007. Updated data on imports will be released on May 1.

“We expect imports to fall at a faster pace than exports during 2009-10. The depreciation in the real effective exchange rate will also pull imports down as overseas goods become costlier,” said Sonal Verma, economist, Nomura Securities.

Another reason for this dip is that imports expanded 37.5 per cent in the same month last year, resulting in a high base.

Falling imports will also impact India’s Customs duty collections. The government has already revised the indirect tax collections target for 2008-09 to Rs 2,81,359 crore from Rs 3,21,264 crore, partly due to the reduction in excise, Customs and service tax rates as part of the fiscal stimulus package to revive the economy.

Initial estimates on exports for the same month also suggest a 30 per cent drop in exports, which have been contracting since October 2008 as demand in overseas markets crashed due to the ongoing economic crisis.

With imports falling at a faster pace than exports, trade deficit — the difference between exports and imports — stood at $4.05 billion, lowest since February 2007. For the year ended March 2009, trade deficit increased by 58 per cent to touch $119.15 billion.

Overall imports during 2008-09 will be $287.75 billion, a rise of 20.56 per cent over the $238.66 billion seen in the previous year. This is the slowest expansion since 2006-07 when imports expanded 19.89 per cent.

(With inputs from Niharika Chandola)