Trade deficit at 23-month high, exports up 22.5%

Imports jump 32.2 per cent to $29.7 billion in August

The country’s trade deficit in August reached $13.06 billion, the highest in about two years, with imports outpacing the growth of exports, prompting Commerce Secretary Rahul Khullar to say “it is a matter of concern”.

The trade gap during the April-August period stood at $56.62 billion. With imports growing steadily every month, the balance of trade is likely to end up at around $135 billion in this financial year.

“The problem remains that of the balance of trade deficit. At this level, we are almost having a deficit roughly of $11.2 billion per month, which comes to $135 billion for the entire year. That will be very large, even compared to $118 billion that we had two years ago. We have concerns primarily about the size of the balance of trade deficit. At the pro rata basis, close to $135-billion trade gap is much higher. Therefore, it is a matter of concern,” Khullar said here today.

He, however, said that deficit was “still within manageable limits and can be easily financed.” While the exports could reach $200 billion by the end of the financial year, import can go up to around $350 billion, he added.

While exports grew by an annual 22.5 per cent to $16.64 billion in August, imports jumped by 32.2 per cent to $29.7 billion. During the April-August period, exports posted a growth rate of 28.6 per cent to $85.27 billion annually, while total imports grew by 33.1 per cent to $141.89 billion, according to initial estimates released by the Ministry of Commerce and Industry today.

The official foreign trade data is scheduled to be released on October 1.

The rise in imports is mainly on account of raw materials used in the production of exports as well as domestic consumption, which is growing at a much faster pace than exports. In August, import of some of the items that grew sharply are petroleum products, fertilisers, gems and jewellery, gold, chemicals, steel, machinery and coal, among others.

This is the highest trade deficit since September 2008. However, in the current financial year, the balance of trade had been steadily rising since June.

According to experts, while the ballooning trade deficit is not really a matter of grave concern at present, it needs to be managed tactfully so as to avoid any severe impact on the current account of deficit, which is around three per cent of the gross domestic product.

“This is not much of a concern now as capital inflows continue to be healthy and our forex reserves are also robust at present. However, in the long run, the gap needs to be narrowed down. The problem is even though India is growing, the market to which it exports is not growing,” said D K Joshi, chief economist, Crisil.

During the month, exports of cotton yarn, man-made fibre, iron ore, plastics, leather, drugs, oil, readymade garments grew while that of tea, electronic items, handicrafts, carpets, fruits and fibres registered decline.