The trade deficit widened to its highest in nearly three years in October, government data showed on Tuesday, as export growth contracted for the first time after more than a year, said a report by The Times of India. The trade deficit widened to $12.02 billion last month from $8.98 billion in September, data from the Ministry of Commerce and Industry showed.
This reverses a 13-month upward trend, Indian exports in October declined year-on-year by 1.12 percent to $ 23 billion due to drop in shipments of textiles, pharmaceuticals, leather goods and gems and jewellery. Exports in September has risen over 25% to a six-month high of $28.61 billion. Imports in October, however, grew by 7.6% to $37.11 billion, from $34.5 billion, in the same month large year.
Decline in exports
Exports had last declined in August 2016 and fall in October was on account contraction in several sectors – mostly labour intensive in nature – textiles and pharmaceuticals to leather and jewellery. In contrast, imports grew by 7.6% to $37.1 billion. Gold imports fell 16% to $2.9 billion, while non-oil imports were 2.2% higher at $27.8 billion, indicating a slowdown in the industry. Oil imports grew 27.9% to $9.28 billion, largely due to high crude oil prices.
Industry lobby group FIEO have blames liquidity problems faced by exporters after GST rollout for the fall and said that refunds had not flowed for four months. “There is an immediate need for remedial measures to prevent further decline in exports otherwise the situation may worsen for November,” it said in a statement. It further added that the measures approved by the GST Council had not been implemented.
Exports during April-October 2017-18 rose by 9.6% to $170.3 billion, while imports grew 22.2% to $256.4 billion, leaving a trade deficit of $86.1 billion. Consequently, India’s trade deficit has widened to $14 billion during the last month as against $11.13 billion in October last year.
Federation of Indian Export Organisation President Ganesh Kumar Gupta said, “The refund of inputs tax credit under the new GST system has been stuck since July, hitting exports.” Goods imports were up 7.6% from a year earlier to $37.12 billion.
Segment-wise data on exports
Segment-wise, the data showed that India’s oil imports during October shot up by 27.89% to $9.29 billion, from $726 billion in the same month last year, said a report by the Business Standard. “The global Brent prices have increased by 19.42% in October 2017 vis-a-vis October 2016 as per World Bank commodity price data.”
Crude prices have rallied, sending Brent crude to its highest since June 2015, a worry given that the country imports most of its energy needs.
However, cumulative exports during April-October quarter increased by 9.62% to $170.28 billion while imports grew by 22.21% to $256.43 billion resulting in a trade deficit of $86.14 billion for the first seven months of the current fiscal.
As per RBI data on Tuesday, Indian services exports in September this year at $13.73 billion resulted in a positive trade balance on this account for the month. Earlier on Tuesday, Commerce Union Minister Suresh Prabhu said India was keen to develop free trade partnerships. At the inauguration of the 37th India International Trade Fair, Prabhu said, “Overall, we would like to increase exports but not discourage imports.” He added that the ongoing mid-term review of the Foreign Trade Policy would be presented soon.