Lower Import Growth Suggest Slowdown is Setting in?.

NEW DELHI: India’s import growth plummeted to 6.8% in October from a year ago, lowest in seven years, reinforcing the perception that India’s domestic economy was slowing down, but exports continued to grow at a fast rate, indicating an improving external environment.

The single digit growth in imports comes on the heels of a below expectation 4.4% rise in industrial production in September, largely due to a contraction in production of capital goods. The sharply lower growth in imports and the 21.3% rise in exports in October helped keep the merchandise trade deficit below $10 billion of second month running.

The commerce department has revised its estimates for annual fiscal deficit to a more manageable $125 billion from over $130 billion. However, the rising crude prices could cause oil imports to become more expensive, expanding the deficit further.

The government is now confident of surpassing the annual export target of $200 billion. “Now we are looking at by how far we will cross $200 billion," commerce secretary Rahul Khullar said. All the sectors that were hit hard by the global slowdown , including carpets and man-made fibre, have begun to post robust increases.

The secretary pointed out that exports growth was cumulatively higher than imports growth after a long time. In the April-October 2010 period, exports rose at a faster pace of 26.8% to $121.4 billion against a 26% growth in imports to $194.2 billion.

With exports back on track, government could consider withdrawing incentives to exporters, given after the global economic crisis of 2008-09 , commerce secretary Rahul Khullar said. "I am sure... next year you will see it," Khullar told reporters. Exporters, however, caution that it may not be the right time to discontinue incentives.

The momentum given to exports in the last few months needs further push in view of fragile market condition in the second half of the financial year,” said Fieo president A Sakthivel. He said much of the growth in exports was coming from diversification of export market pushed through in last one and a half years by the government through market-based incentives.

Source : economictimes.indiatimes.com