News
Exports lose steam, deficit widens despite low imports
NEW DELHI: The recovery in exports that helped arrest the slide in India's external balances seems to have lost some steam with shipments rising at the slowest pace in six months in December, but the seventh successive monthly decline in imports, led once again by gold, helped contain the trade deficit to just over $10 billion.
Exports rose 3.49 per cent in December from a year ago to $26.35 billion, data released on Friday showed, while imports fell 15.25 per cent to $36.49 billion, yielding a trade deficit of $10.14 billion compared with $9.22 billion in November.
Gold and silver imports dropped 68.83 per cent in December. The export number was softer on account of lower petroleum product shipments amid a planned refinery shutdown at Reliance Industries.
"We now believe that CAD would be lower than earlier anticipated, in the range of $35 billion to 40 billion," said Shubhada Rao, chief economist, Yes Bank. India Ratings expects the current account deficit in the October-December quarter at 1.1 per cent of GDP, while Rohini Malkani of Citi has pegged it at 2.3 per cent.
The dramatic slide in the rupee to just short of 69 to the dollar in August from around 54 at the beginning of the current fiscal year had forced the government into a desperate fight to contain the current account deficit, which had touched a record high of 4.8 per cent of GDP in 2012-13.
Freeing up fuel prices and imposing stiff curbs on gold imports aided by the timely revival of exports helped retrieve the situation with the current account deficit expected at around 2.5 per cent of GDP for the year, following the sharp narrowing of the trade deficit in the first nine months.
Exports in the April-December period rose 5.94 per cent to $230.3 billion, while imports fell 6.55 per cent to $340.3 billion, leaving a trade gap of $110 billion compared with $147 billion in the year-earlier period. The government said exports would have been higher but for a scheduled shutdown of the Jamnagar refinery of Reliance Industries that depressed petroleum exports.
"It is only one product group which has contributed to (slower growth in exports) and that is petroleum products," commerce secretary SR Rao said. "All product groups, with more than a 2 per cent share in the annual export basket, are showing a very encouraging positive trend."
Experts were hopeful overseas shipments will accelerate in the coming months. "The latest softening of export data should not be seen as particularly worrisome, as growing global demand would push up exports soon," Deutsche Bank Taimur Baig and Kaushik Das said in a note. But industry demanded some government help to push exports along. "The economic conditions in the US and the euro zone are not very favorable for exports and we hope the Indian government will help the exporters," CII said.
Engineering exports were the top performer of the month, expanding by 15 per cent, overtaking petroleum exports. Exports will need to clock a 15.15 per cent growth in the remaining three months to achieve the $325 billion target set for the fiscal.
India's export growth has been supported by the 11% rupee depreciation in the current fiscal year, besides the pickup in demand.
Shipments to China, the US and the UAE have recorded an average growth of 19.2 per cent between August and November, compared with a year-earlier decline of 15 per cent. Gold and silver imports in December recorded a 68.83 per cent decline in December to $1.77 billion from $5.6 billion last year, as against $1.05 billion in November. The government may ease curbs on gold imports given the sharp improvement in CAD.
Freeing up fuel prices and imposing stiff curbs on gold imports aided by the timely revival of exports helped retrieve the situation with the current account deficit expected at around 2.5 per cent of GDP for the year, following the sharp narrowing of the trade deficit in the first nine months.
Exports in the April-December period rose 5.94 per cent to $230.3 billion, while imports fell 6.55 per cent to $340.3 billion, leaving a trade gap of $110 billion compared with $147 billion in the year-earlier period. The government said exports would have been higher but for a scheduled shutdown of the Jamnagar refinery of Reliance Industries that depressed petroleum exports.
"It is only one product group which has contributed to (slower growth in exports) and that is petroleum products," commerce secretary SR Rao said. "All product groups, with more than a 2 per cent share in the annual export basket, are showing a very encouraging positive trend."
Experts were hopeful overseas shipments will accelerate in the coming months. "The latest softening of export data should not be seen as particularly worrisome, as growing global demand would push up exports soon," Deutsche Bank Taimur Baig and Kaushik Das said in a note. But industry demanded some government help to push exports along. "The economic conditions in the US and the euro zone are not very favorable for exports and we hope the Indian government will help the exporters," CII said.
Engineering exports were the top performer of the month, expanding by 15 per cent, overtaking petroleum exports. Exports will need to clock a 15.15 per cent growth in the remaining three months to achieve the $325 billion target set for the fiscal.
India's export growth has been supported by the 11% rupee depreciation in the current fiscal year, besides the pickup in demand.
Shipments to China, the US and the UAE have recorded an average growth of 19.2 per cent between August and November, compared with a year-earlier decline of 15 per cent. Gold and silver imports in December recorded a 68.83 per cent decline in December to $1.77 billion from $5.6 billion last year, as against $1.05 billion in November. The government may ease curbs on gold imports given the sharp improvement in CAD.