India’s exports declined an annual 4.17% in November — the seventh straight month of negative growth — while imports grew 6.35%, leaving a merchandise trade deficit of $19.28 billion. The trade deficit was only marginally down from the $20.96 billion recorded in the previous month, which was the worst in the last 17 years.
The steady contraction in exports coupled with the import bill — inflated to an extent by the weak rupee — even in a slowing economy has raised concerns about the current account deficit (CAD), which stood at a worrisome 4.3% of the GDP in 2011-12 and is officially forecast to be 3.5% in the current fiscal.
The steady fall in exports is likely to prompt the government to announce incentives by the weekend to boost shipments.
CAD occurs when a country’s total import of goods, services and transfers is greater than its total export of goods, services and transfers. The CAD stood at 3.9% in the first quarter of this fiscal, much lower than 4.5% in the previous quarter.
The Q2 CAD figure is expected later this month.
A few weeks ago, Crisil said a moderation in import growth could help CAD to be restricted at 3.1% in 2012-13, but a significant widening of the trade deficit since September has now raised fresh concerns on this front.
The demand slowdown in western markets led to India’s exports declining 4.17% in November to $ 22.3 billion while imports grew 6.35% to $41.5 billion.
Pertinently, Standard & Poor’s on Tuesday said the Indian government’s bloated fiscal deficit and heavy debt burden are the most significant rating constraints. The current fiscal deficit target of 4.5% of the GDP of 2014 may be beyond the government’s reach, S&P said.
Commerce secretary SR Rao said that although shipments are declining, the contraction has been slightly arrested. “There has been a slight improvement... Hopefully, the government will be coming out with a new package for boosting exports in the last quarter which the commerce minister will be announcing towards the end of the week,” he said.
He added that the steady rise in crude imports has pushed the import bill to $318.7 billion during April-November 2012 and the rising demand for petroleum products was distressing.
“Though the speed of decline is lower than before, it is no reason to be complacent. Global growth is weak and we can’t buck the trend. We will have to endure it for some more