Merchandise exports grew for a fourth straight month in December despite demonetisation, and imports rose for a third successive month, despite expectations that the cash crunch might have reversed a nascent trade recovery. Exports rose 5.7% to $23.88 billion and imports advanced 0.5% to $34.25 billion in December, albeit aided by conducive base effects (In December 2015, both exports and imports had contracted).
Trade deficit touched $10.4billion in December, compared with $13 billion in November, which was the highest since November 2014, showed the official data released on Friday. Higher trade deficit in recent months due to an improvement in imports may further pressure the current account deficit, which widened to 0.6% of GDP in Q2 of 2016-17 from 0.1% in Q1.
Services exports rose 1.7% to $13.34 billion in November, compared with a 4.7% drop in the previous month, according to the official data. Services imports, rose 8.4% to $8.32 billion in November from a year earlier.
However, with the US Federal Reserve hiking the interest rate by 25 basis points last month, the potential weakening of the rupee against the dollar might brighten export prospects. But analysts say the key to any improvement in export competitiveness will be how much the currencies of its peers depreciate against the dollar in such a scenario. Although the rupee has witnessed some volatitlity in recent months, it still remains one of the best-performing currencies among emerging economies.
You may also like to watch this video
The rise in exports in December helped reverse an earlier decline, as the outbound shipments during the April-November period grew modestly. Higher growth in November and December also partly narrowed a sharp decline in imports between April and December.
Trade deficit with China mounts to $46.56 billion
India’s trade deficit with China mounted to a whopping $46.56 billion last year as Indian exports continued to decline while the bilateral trade marginally slowed down by 2.1% to nearly $71 billion. The total India-China bilateral trade in 2016 amounted to $70.8 billion, a decline of 2.1% as per the trade figures released by General Administration of Customs (GAC).