Trade deficit at 29-month high

Exports rise for 8th month, albeit at lower pace

Exports in April grew at 19.4 per cent, resulting in growth for eight consecutive months, but the trade difference was the highest in 29 months because of a 49.2 per cent jump in imports.

The increase in imports was because of rising commodity prices and inbound shipments of gold, but it was also an indication of industrial recovery.

Exports had, however, grown higher at 27.6 per cent in March, which was the steepest in a little over five years.

Outbound trade in April, the first month of the current financial year, was $24.6 billion, compared to $20.6 billion in the same month last year, according to the data of the commerce and industry ministry, released on Monday.

Additionally, a spurt in demand and higher crude oil prices continued to push up imports to $37.9 billion in April, against $25.4 billion a year ago. The trade deficit thus, rose to $13.3 billion.

“With the healthy increase in merchandise exports on a year-on-year basis in April 2017 getting dwarfed by the 49 per cent spike in imports, the trade deficit increased sharply higher than our forecast of $8-9 billion,” said Aditi Nayar, principal economist, Icra.

Imports of petroleum and other crude oil products rose a little more than 30 per cent to $7.35 billion. Gold imports rose 211 per cent to $3.85 billion in April due to Akshaya Tritiya.

Non-gold non-oil imports, indicating industrial recovery, rose substantially by 64.1 per cent. This may be partly because of rising global prices but may indicate increasing demand for industrial sectors.

The index of industrial production grew 2.7 per cent in March, against 1.9 per cent in February. Indicating robust industrial demand, imports of machinery products rose 37 per cent to $2.65 billion.

Higher prices for petroleum products and a revival in engineering export in the latter part of the financial year saw India’s export in 2016-17 reaching $274 billion, against $269 billion the year before.

In April, the export of petroleum products saw the highest rise among major forex earners, rising by 48.8 per cent over a year before to $2.94 billion.

Photograph: Fayaz Aziz/Reuters