IT exports and remittances no more enough to cover import bill

In last ten years, India's import bill grew at a CAGR of 23% against 20% growth in IT exports and dollar remittances during the period

A spike in international crude oil prices and Indians love for gold has played a major role in worsening India’s current account balance. In last ten years, crude oil imports grew at a compounded annual growth rate (CAGR) of 25.4% while gold imports galloped at the rate of 30.2% during the period. India’s total merchandise imports during the period grew at the rate 23.1% per annum. These two commodities together accounted for 45.4% of India’s total merchandise imports in FY13 up from 25% in FY03.

Faster economic growth and investment in India however translated in faster imports for capex related items as well such as capital goods (22.5% CAGR), metals & ores (27.9%) and coal (28.7%). However, till 2006-07, export income from the booming IT sector and dollar remittances from Indians working aboard was more than enough to cover crude oil and other merchandise exports, while export revenue including invisibles fell short of the requirement. There are signs that things could improve again given the buoyancy in exports of agriculture and allied products and non-traditional manufacturing goods such as pharmaceuticals, transport equipment and engineering goods.