Imports contract in April-Jan on petro rates, industrial slump & gold curbs

Merchandise imports fell 7.85 per cent in the first 10 months of the current financial year against a 0.54 per cent rise in the corresponding period of 2012-13, reflecting depressed prices of petroleum products, government measures to curb inbound shipments of gold, and low demand in the economy as well as in the overseas markets.

Inbound shipments fell to $376.90 billion during the April-January period of FY14, compared with $409 billion in the corresponding year-ago period.

The largest chunk of the basket - crude and petroleum products - rose only 1.36 per cent to $138.36 billion, against $136.50 billion over the period. Oil imports had risen 8.44 per cent in the corresponding period of the previous year.

This reflected depressed global crude oil rates, which declined to an average of $107.46 a barrel during April-January 2013-14 from $114.77 billion a barrel in the corresponding year-ago period.

Non-oil imports, an indicator for industrial activity in the economy, fell 12.46 per cent at $238.54 billion against $272.51 billion in the previous year.

However, part of it was gold import. The import plunged 45.15 per cent to $24.79 billion against $45.20 billion earlier on a deliberate move by the government to raise import duty to 10 per cent and impose the 80:20 rule to narrow the current account deficit. According to the rule, importers will have to export 20 per cent of imported gold.

Besides the curb, global rates of gold also fell 25-30 per cent in 2013 compared to 2012, which led to a fall in the inbound shipments, said Ajay Sahai, director-general of the Federation of Indian Export Organisations.

As restrictions on gold imports were deliberate, it is also important to assess non-oil-non-gold imports. These fell 5.96 per cent to $213.75 billion in the first 10 months of the current financial year from $227.31 billion in the corresponding year-ago period.

"This explains why industry is so week. Since demand is low, import of these items also contracted," said Devendra Pant, chief economist at India Ratings.

Overall, industrial production recovered slightly by growing 0.1 per cent in January, after three months of contraction. For the first 10 months of the current financial year, industrial production was stagnant against one per cent growth during April-January of FY13.

Besides, petroleum and gold, the other items whose imports were at least $20 billion include electronic goods, pearls, precious and semi- precious stones, and machinery other than electronics.

Electronic goods imports recovered at a gradual pace, growing by 1.31 per cent at $26.23 billion in April-January 2013-14 against $25.89 billion in the same period in 2012-13, when it contracted 6.91 per cent. It was partly reflected in exports of electronic goods, even as these continued to fall. These exports declined 4.92 per cent in the first 10 months of the current financial year, against a 9.11 per cent decrease in April-January of 2012-13.

Imports of machinery other than electricals and electronics plummeted 14.27 per cent at $19.83 billion against $23.13 billion. These imports fell 6.66 per cent in April-January of 2012-13.

However, pearls, precious and semi-precious stones rose 13.07 per cent at $19.99 billion against $17.68 billion over the period. This was a smart recovery since these imports plunged 27.53 per cent in the first 10 months of 2012-13.

As the government took measures to curb coal imports, particularly low-quality one, inbound shipment of coal, coke and briquettes fell 6.83 per cent at $13.65 billion in April-January 2013-14 against $14.65 billion in the same months a year ago when these declined just 1.64 per cent.

Reflecting poor demand for auto industry, import of transport equipment contracted 21.72 per cent at $10.75 billion against $13.74 billion over the period. It rose 23.98 per cent in the first 10 months of 2012-13.

Mirroring industrial slump, project goods nose-dived 30.73 per cent at $3.91 billion from $5.65 billion, iron and steel by 29.39 per cent at $5.87 billion from $8.31 billion, machine tools by 26.95 per cent at $1.71 billion from $2.34 billion, electrical machinery by 1.29 per cent at $3.67 billion from $3.71 billion.

Even as gold imports fell on the conscious policy of the government, inbound shipments of silver saw a spurt of 161.86 per cent $4.61 billion against $1.54 billion.

"This reflected relative returns on silver compared to gold. Besides, silver is used for a variety of industries as inputs now," said Sahai.