Macroeconomic indicators - India trade deficit may rise to USD 428 billion by 2015-16 - ASSOCHAM.

Industry body ASSOCHAM said that India’s trade deficit could rise from USD 130.5 billion in 2010-11 to USD 428.3 billion by 2015-16 and become unsustainable with merchandise imports rising from USD 380.9 billion to USD 858.6 billion.

According to a study by The Associated Chambers of Commerce and Industry of India, the imbalance likely to be above USD 180 billion in 2011-12. While the share of manufactured goods in exports of China, Japan and Germany is very high, India’s share has declined from 44.1% in 2000-01 to 37.5% in 2010-11.

The country’s merchandise exports during 2015-16 will stand at USD 430.3 billion, up from USD 250.5 billion in 2010-11 with exports of manufactured goods rising from USD 101.6 billion to USD 119.6 billion. Exports of petroleum products are set to rise from USD 41.9 billion to USD 51.2 billion in the same period.

On the flip side, said the study, oil imports will jump from USD 106.1 billion to USD 243.7 billion while gold imports will rise from USD 33.9 billion to USD 83.3 billion in the same period.

However, if capacity building of the industry takes place and competitiveness of Indian exports improves, then merchandise exports can stand at USD 549 billion in 2015-16 and the trade deficit will be USD 309.6 billion.

ASSOCHAM secretary general Mr DS Rawat while quoting the study said that “There is need to curtail oil imports, or else there will be a severe burden on external payments position. The gold imports figure must also decrease by educating domestic investors and encouraging substitution of gold purchases with alternatives from formal financial sector which will help in increasing the productive capacity of economy.”

It is thus critical to enhance manufacturing capabilities along with improvement in technological content of products which should translate into sharpening the export competitiveness and gaining a price advantage. Promotion of international trading houses will help develop strong international linkages.

The study said growing uncertainties in the Eurozone, slowdown in advanced economies and weakening of the domestic had adversely impacted India’s external sector outlook.

Adverse global conditions and protectionist attitude being adopted by various western countries may lead to further drop in service exports, further decreasing the invisibles contribution to current account.

ASSOCHAM said India’s capital account rose almost seven times from USD 8.5 billion in 2000-01 to over USD 57.3 billion in 2010-11 with foreign investments being a major contributor. In times of global uncertainty, it is very much likely that foreign investors pull out their money from India and take it back to their home countries. It said that “Poor regulations, inefficient processes and inconsistency of policies may also deter potential foreign direct investments.”

Source : steelguru.com