NEW DELHI: India’s trade deficit touched a 56-month high in January, driven by a sharp rise in imports of petroleum, chemicals, silver, pearls and machine tools, even as exports expanded for the third consecutive month. A 9% rise in exports at $24.3 billion was outweighed by a 26% increase in imports at $40.6 billion, leaving a trade gap of $16.3 billion, the highest since May 2013.
Petroleum and crude oil imports continued to inflate India’s import bill, rising 42.64% from last year to $11.65 billion, Government data showed.
Imports of pearls and precious and semi-precious stones jumped 55.71% to $2.4 billion. However, gold imports declined 22% to $1.59 billion last month. “The trade deficit is alarming. At this rate, trade deficit will touch $150 billion this year,” Federation of Indian Export Organisations (FIEO) Director-General
Ajay Sahai said. In the April-January period, trade balance was $103.7 billion. “Imports of finished goods are being encouraged because the incidence of tax borne earlier is no longer there. This is a cause of worry,” Sahai added.
Five sectors — coal, chemicals, precious metals, petroleum and machinery — showed at least $500 million of increase in imports from a year earlier.
“With the merchandise trade deficit for January 2018 being sharply higher than expected, we have revised our forecast for the FY2018 current account deficit to $47-50 billion or nearly 2% of GDP, from the earlier expectation of $42-44 billion,” said Aditi Nayar, Principal Economist at ICRA.
On exports side, outward shipments increased in 20 out of 30 sectors, but declined in traditional sectors like yarn and readymade garments whose competitive edge could have been blunted by an appreciating rupee.
Exports of readymade garments fell 8.4% to $1.39 billion, while cotton yarn and fabric shipment declined 9.6% to $0.84 billion. “We are losing our competitiveness. There is a major skilling issue here,” Sahai said.
Major commodity groups which showed growth in exports were engineering goods (15.77%), petroleum products (39.5%), gems & jewellery (0.89%), organic & inorganic chemicals (33.6%) and drugs & pharmaceuticals (8.6%), according to data released by the Commerce Ministry.