November exports grow 26.8%, imports 11.2%.

NEW DELHI: India’s exports grew at the fastest rate in five months, well outpacing the growth in imports, raising hopes that the gap between exports and imports could fall to reasonable levels soon.

The country’s current account deficit is expected to widen to 3% of GDP, creating concerns about the ability to finance it if there is a let-up in foreign inflows. The current account deficit is the difference between a nation’s total exports of goods, services and funds, and its total imports.

“I am not sanguine,” commerce secretary Rahul Khullar said indicating the risk country faces from the rising commodity prices. “One blip on crude prices and my import bill suddenly zooms,” he said.

Crude prices have rallied to over $90 a barrel recently, increasing the burden on India which imports nearly 70% of its crude requirements.

“The rising current account deficit is a key risk to India’s growth story,” Goldman Sachs economists Tushar Poddar wrote in a recent research note.

Shipments of goods were up 26.8% in November 2010 from a year ago, prompting both the government and the industry to lift the target for the year to $210-215 billion as against $200 billion estimated initially.

The annual imports could, however, drop because of the moderation in growth in recent months. Imports were up 11.2% to $27.8 billion.

The government now expects the trade deficit to drop to, what it thinks is a manageable, $120 billion for the entire fiscal. Trade deficit dropped to $8.9 billion for November from over $13 billion in August.

The gap could, however, widen quickly if exports growth were to slow down or imports surged because of rising commodity prices.

“This (high exports growth) is certainly a positive as we have a narrowing trade deficit. But we need to monitor our import bill especially because crude oil prices would remain firm during the winter,” said Shubhada Rao, Chief Economist at private sector lender Yes Bank .

Nearly all the sectors, including engineering, petroleum , pharmaceuticals, gems & jewellery and chemicals , recorded high growth to push up overall export for April-November to $140.3 billion, 26.7% higher from a year ago. Fieo, the umbrella body of exporters, expects exports to reach an all-time high of $ 220 billion this fiscal.

Imports grew 24% in April-November to $222 billion , resulting in a trade deficit of $81.7 billion. But the government said the recent slowdown in imports did not suggest a slowdown as it was largely because of lower oil import bill.

Growth in import of capital goods, projects and intermediaries continued to be high despite a lower growth in overall imports, reflecting high economic activity, the secretary said.

Source : economictimes.indiatimes.com