Softening prices to blunt higher quantity of edible oil imports

Imports of pulses likely to fall in FY14

Imports of edible oils are expected to rise in quantity terms in 2012-13 ending October, but softening prices will give a bit of relief to policy makers struggling to contain the current account deficit (CAD).  

On the other hand, imports of pulses are likely to fall in 2012-13 due to expected good production.

India imported around 6.94 million tonne of edible oils in the first eight months of 2012-13 edible oil marketing year that starts from November, almost 11% more than the same period last year.

In value terms, Indian edible oils imports have shrunk. According to the Solvent Extractors' Association of India (SEA), during the same period India imported edible oils worth around Rs 33,000 crore, as compared to Rs 36,000 crore imported during the same period last year.

“The value of imports is down by almost 20%, but the quantum has gone up in the first eight months of 2012-13 as compared to the same period last year because overall international edible oils prices have softened this year,” SEA executive director B V Mehta told Business Standard.

In the entire 2012-13, SEA believed that overall edible oils imports would be around Rs 55,000-56,000, same as 2011-12 even as total quantum of imports in volume-wise would be around 10-10.5 million tonne, which is 0.5-1.0 million tonne more than 2011-12, Mehta said. This is due to softening of global prices.

This may mean bit of lower dollar inflows as the rupee has been depreciating.
 
In 2011-12 edible oil marketing year, India imported a record 9.98 million tonne of edible oils, almost 19.2% more than the previous year as domestic oilseed production fell woefully short of demand.

In 2012-13, India produced 31.0 million tonne of oilseeds, which was around 4.4% less than last year.

Imports of edible oils saw the steepest rise by 16% to $11.2 bn in 2012-13 financial year from $9.7 bn in 2011-12, crossing the $10 bn mark for the first time. India imports around 60% of its requirements, mainly from Indonesia and Malaysia.

Meanwhile, India is expected to import around 3.5 million tonne of pulses in 2013-14, which would be around 15% less than the previous year, according to SEA.

In value terms, India imported $2.3 billion of pulses in 2012-13, almost 28% higher over $1.85 billion in the previous year.

“In 2012-13, we imported around $2 billion worth of pulses. This year the import of pulses value-wise might be lower as domestic production is more and good monsoon will aid further harvest,” Bimal Kothari, vice-chairman Indian Pulses and Grains Association told Business Standard.

India’s pulses production in 2012-13 crop marketing year (April-March) reached a record 18.45 million tonne, almost 7.9% more than the previous year because of bumper harvest. In 2013-14, too, experts believe that pulses production might reach the new record as sowing during the ongoing kharif season is excellent propelled by good rains.

    
India's CAD touched the record 4.8% of GDP in 2012-13 from 4.2% in the previous financial year. Trade deficit, a critical part of CAD, rose to $50.2 billion in the first quarter of the current financial year from $42.2 billion in the corresponding period of 2012-13. As such, trade deficit grew 18% in the first quarter. With GDP growth expected to remain muted even in the nominal terms in the first quarter of the current financial year, trade deficit may be quite high as percentage of GDP, that may widen CAD much higher than 3.9% of GDP in the corresponding period of 2012-13.