Ballooning imports widen trade deficit .

The import of coal, fertilisers and vegetable oil surged from $23.1 billion in 2010-11 to $38.3 billion in 2011-12, adding more than $15 billion to India’s import bill and widening the trade deficit.

Total merchandise imports went up by 32.1 per cent at $488.6 billion and exports grew by 21 per cent to $303.7 billion, resulting in a trade deficit of $184.9 billion last year.

Coal imports went up by a staggering 80.3 per cent to $17.6 billion from $9.8 billion. Similarly, fertiliser imports grew by 59 per cent to $11 billion from $6.8 billion. Vegetable oil imports went up by 47.5 per cent to $9.7 billion from $6.5 billion. This is an addition of $ 15.1 billion as compared to 2010-11.

India has already seen a huge jump in the cost of oil and gold imports, mainly due to a nearly 40 per cent increase in crude prices and rising preference for gold as an asset. Petroleum imports stood at $155.6 billion, up $50 billion over the preceding year. Bullion imports were $61.5 billion, an addition of $19 billion over the previous year.

“The high imports of coal, fertilisers and edible oil are linked to domestic policy. The nodal ministries should work towards fixing the coal problem, increasing the domestic supply of vegetable oil and bring in a fertiliser pricing policy to address the issue at the earliest or else the problem will accelerate,” commerce secretary Rahul Khullar said on Thursday after releasing trade data for 2011-12.

In truth, the centre may have very limited options to check import of the three commodities, given the huge coal requirement of the expanding power sector, the need to keep farmers supplied with fertilisers and to keep vegetable oil prices from shooting. Curbing gold imports by raising imposts was easier.

In his budget last month, finance minister Pranab Mukherjee doubled the import duty to 4 per cent on gold in a bid to curb its import. According to Khullar, high imports last year pushed the current account deficit beyond the comfort zone at nearly 4 per cent of GDP. He hopes that this will range between 3 and 3.5 per cent in 2012-13. “We can expect some moderation in imports in the current financial year as I do not expect crude prices to go up by 40 per cent again this year. Moreover, with inflation dampening, I expect demand for gold as a storage asset will also come down. Besides, the import duty of 4 per cent will also act as a deterrent,” he said.

Exports rebound last month after a deceleration since October, hinting at a healthy revival in the first quarter of the current year, as the lag effect of nominal exchange rate has kicked in. While exports were 16.67 per cent higher in March at $28.7 billion than in the month before, they were 7.11 per cent below the March 2011 level. Khullar attributed this to collapse in export destinations since September.

“The trade deficit of $184.9 billion that is the highest ever and is a cause of concern. But looking at the profile of imports, very little manoeuvring is possible since the trade deficit has widened mainly on account of large imports of petroleum, gold and silver and coal, machinery and inputs. While import of machinery and inputs, petroleum and coal would be necessary for meeting domestic manufacturing and energy requirements, some respite in gold and silver import would be possible if other avenues of investments like stock market and real estate start giving good returns,” Rafeeque Ahmed, president of the Federation of Indian Export Organisation, said.

Source : mydigitalfc.com