NEW DELHI: India’s imports posted a strong growth for the second month running in January, signalling a pickup in domestic demand and investment activity. Inward shipment rose 35.5% to $24.70 billion compared to $18.22 billion a year ago.
Though trade deficit almost doubled during the month due to a lower growth in exports, experts did not see this as a cause for concern as higher imports of inputs point to a strong revival of exports in the coming months. “The trade data shows that import growth is in tandem with the performance of our manufacturing sector which is growing at 15%-16%,” said Fieo director general Ajay Sahai, adding that the increase in imports seemed to be mostly of raw materials and capital goods, especially for power projects.
Non-oil imports registered a growth of 28.8% in January, while oil imports were up 56% from the year ago period.
Global trade in goods bounced back in recent months, notching a near 5% growth in December 2009, indicating a pick-up in demand for India’s exports. Though exports have recovered since November 2009, the growth has been somewhat tepid with January 2010 exports up 11.5% from a year ago.
Exports stood at $14.34 billion in January compared with $12.86 billion in the same month a year ago. In November and December also, exports grew 18.2% and 9.3% respectively. Prior to that, they fell continuously for 13 months from October 2008, impacted by the global recession that affected some of its largest markets.
The detailed break-up of non-oil imports is not available. Bulk of India’s imports are inputs that either goes into production capacity creation or investments. A big jump in non-oil imports, therefore, indicates a pick up in investments and demand for goods.
“The import growth seems to be healthy as it is likely to get translated into higher exports in the next quarter,” says K T Chacko, director, Indian Institute of Foreign Trade (IIFT) adding that the high trade deficit is not a cause for concern at this stage as a lot of our imports are used as inputs for our exports.
The trade data brings cheer at a time when lower-than expected GDP expansion in the third fiscal quarter is threatening to upset the optimistic economic growth outlook for the current fiscal year and the next. The Central Statistical Organisation (CSO) had on Friday said the economy grew at 6% in the three months to December, in line with its conservative estimate of 7.2% growth for the whole year.
The finance minister had hinted at a higher rate of growth, which now look unrealistic. The Q3 growth figure has also raises questions over the economic survey’s 8.25-8.75% GDP growth forecast for fiscal 2010-11.
Source : The Economic Times