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December Trade Data: Imports contract after 27 months, exports up 0.34%.

Date: 16-01-2019
Subject: December Trade Data: Imports contract after 27 months, exports up 0.34%
Trade slowdown worsened in December 2018, as merchandise export growth plunged for a second straight month to just 0.34% and imports witnessed their first contraction since September 2016.

Trade deficit, consequently, eased to $13.1 billion in December, the lowest since February last year, showed the data released by the commerce ministry on Tuesday.

Exports rose only marginally to $27.93 billion in December, against $27.83 billion a year before, as a contraction in outbound shipments of products — including engineering goods, gems and jewellery and certain farm items — offset a decent increase in those of petroleum products, chemicals and electronics.

This indicates while the sharp rupee depreciation may have weighed on import demand, the country’s ability to exploit the situation to boost exports is far from strong, said analysts. Some analysts feel the drop in imports suggests economic recovery remains uneven. Non-oil and non-gold imports witnessed a 1.86% drop, while such exports rose just 1.08% in December.

Importantly, exports of some farm items dropped — oilseeds by 27%, tea by 11%, coffee by 35.3% and fruit and vegetable by 13% — while those of rice inched up by only 1.3%. Even exports of meat, dairy and poultry items plunged by 24.6% in December, having already contracted by over 31% in the previous month, while marine exports declined by 7.4%.

The shipment of engineering goods, a prime driver of export growth in recent months that also accounts for around a fourth of total exports, dropped 3.1%, while gems and jewellery exports fell 19.2%. Petroleum product exports rose 13.2% to $4.2 billion in December.

As for merchandise imports, a 12% drop in crude oil prices (compared with a year earlier) prevented imports of petroleum products from spiralling sharply in December (such purchases rose only 3.2% to $10.67 billion). Imports of gold dropped 24.3% (to $2.57 billion) and those of pearls and precious stones plunged by 28%.

Calling for urgent support — including higher credit and fiscal incentives — to prop up exports, FIEO president Ganesh Kumar Gupta said sectors such as petroleum, chemicals, plastic & linoleum and garments, which had witnessed high growth in the previous month, recorded slower expansion in December. Exports by all major labour-intensive sectors, including gems and jewellery, engineering, leather, certain man-made textiles and agriculture, are now in the negative territory, Gupta added.

Overall, merchandise exports during the April-December period rose 10.2% to $245.44 billion, while imports grew at a sharper pace of 12.6%. At $82.7 billion, overall trade deficit (including services trade) between April and December is estimated to be almost 19% higher than a year before. This will weigh on current account deficit, which is expected to worsen to 2.8-3% of GDP in FY19 by many analysts, compared with 1.9% a year before.

Source: financialexpress.com

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