India Heading for $135 Billion Trade Gap.

India could be heading for an all-time high trade gap of $135 billion this fiscal, according to Commerce Secretary Rahul Khullar. Though exports rose for the 10th consecutive month in August, growing at 22.5 per cent year-on-year to $16.64 billion, the trade deficit – the gap between exports and imports – for the fiscal year to August widened to $56.62 billion.

Analysts attribute the growing gap to the country’s burgeoning import numbers, with rising industrial growth pushing up demand for inputs. Against the 22.5 per cent increase in exports in August, imports rose 32.6 per cent to $29.7 billion.

Government data showed a 41.1 per cent increase in non-oil imports at $21.88 billion for August over the corresponding period in the previous year, while oil imports were up 31.7 per cent at $40.73 billion.

According to the Commerce Ministry, while exports for the fiscal year to August grew 28.6 per cent on a year-on-year basis to reach $85.27 billion, imports rose 33.1 per cent to $141.89 billion.

“The rise in non-oil imports reflects the outcome of the floods leading to an increased demand for essential commodities,” said Shanto Ghosh, principal economist at consultancy Deloitte Touche Tohmatsu Ltd. This, he said, has only added to the inflationary trend in food prices. “Since we have always remained a net importer, our primary challenge is to deal with increased inflationary pressure on the exchange rate and balance India’s large current account,” he added.

At the same time, he seemed optimistic. “The silver lining is that our export numbers seem encouraging, and by October, we would see a reversal of import of agro-commodities. All of this will be fuelled by the good monsoon, resulting in the easing of non-oil import numbers.”

At a press briefing in Delhi recently, Khullar too expressed confidence about the country being on the right track and meeting the estimated export target of $200 billion.

But though he was upbeat about the improving exports numbers, Ghosh said meeting export target “in the remaining seven months seems like a very tall order.”

Source : tehelka.com