Engineering export body EEPC India today said large imports of engineering goods, in addition to crude oil and gold, are exerting pressure on country's current account.
The CAD has widened to a record high of USD 88 billion or 4.8 per cent of the GDP for the fiscal ended March 31, from USD 78.2 billion in 2011-2012, about 4.2 per cent of the GDP.
The import-export gap in the engineering items is overly negative at USD 17 billion (2012-13) despite the fact that engineering items are among the largest contributors to India's total export basket, an EEPC India study said.
The engineering exports have not been picking up. They fell by 5.77 per cent in the first four months of the current financial year, it added.
"It is not only crude and gold imports which are causing India's CAD to swell but also several other items like industrial machinery and other capital goods," EEPC India Chairman Aman Chadha said.
While there are no domestic alternatives available for the crude oil and gold, import of engineering goods can be reduced by giving a boost to the capital goods sector, he added.
"It is very much doable, and nurturing the sector can make the country achieve a positive balance of trade in the engineering goods sector in the next five years," Chadha said.
The study said there are at least 79 tariff lines of different engineering products such as automotive engines, which have shown an annual compound average growth of as high as 35 per cent in some cases.
"For instance, imports of engines of cylinder capacity greater than 250 CC were only USD 114 million in 2005-06. The import of this item has now crossed USD one billion," it said.
"We must lower the manufacturing/engineering trade deficit. This can be done by only by promoting the production of capital goods sector in the country," the study done by EEPC India (formerly Engineering Export Promotion Council ) said.
In order to curtail import of engineering items, EEPC India said the government should immediately launch a Technical Upgradation Scheme.
"We must thus move towards promotion of valued Ņ added goods in the country," Chadha added.