| Date: |
15-10-2014 |
| Subject: |
Trade deficit at 18-month high as gold, crude imports surge |
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NEW DELHI: Trade deficit widened the most in 18 months as imports surged and export performance remained muted in September, raising concerns of worsening external account if the global economy remains sluggish. Exports rose 2.73% in September to $28.9 billion while imports climbed 26% to $43.2 billion, according to data released by the commerce department on Tuesday.
The trade deficit was $14.2 billion. A slowdown in the euro zone has hit export growth, which remained tepid for the second straight month. In rupee terms, exports shrank 1.92%. Value of gold imports jumped five-and-half times to $3.7 billion during the past month, but, on the positive side, higher gold supply translated into an over 11% rise in gems and jewellery exports. Also added to higher imports in the past month was crude oil, with a 9.7% increase. Gold imports were low last year because of curbs imposed by the government and central bank to reduce its local consumption.
The new NDA government is taking a cautious stand on easing the import restriction, which were imposed by the previous regime after current-account deficit widened to an all-time high of 4.7% of gross domestic product in 2012-13. "If higher volumes of these commodities (oil and gold) sustain, the current-account deficit in FY15 may be wider than the expected $37-42 billion. Based on the available data, we expect the current account deficit to rise to around $11 billion in Q2 from under $8 billion in Q1," said Aditi Nayar, senior economist at ratings firm ICRA. On the oil front, falling prices may be boosting demand.
Lower international crude prices also dented India's petroleum exports, which dropped more than 17% in the pat month. "Softening of crude prices... contributed to decline in petroleum exports. A sector which normally would have shown around 15% growth has exhibited a 13% decline, which has impacted overall exports growth by 5-6%," said M Rafeeque Ahmed, president of the Federation of Indian Export Organisations.
Slower global growth is expected to damp exports going ahead. The World Trade Organization last month cut its forecast on global trade growth for 2014 to 3.1% from 4.7% predicted earlier. The government is expected to announce its foreign trade policy for 2014-19 by the third week of October, which will not only focus on enhancing exports, but also boosting domestic manufacturing.
Source : economictimes.indiatimes.com
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