The slowdown in the domestic economy and lower oil prices in April resulted in imports falling at a faster pace than exports. Imports contracted by 36.6% to $15.75 billion in April 2009 over the same period last year, with oil imports falling by as much as 58% to $3.63 billion. Worryingly, non-oil importsa proxy for Indian companies overseas purchasesfell by 24.6% to $12.11 billion.
This resulted in a narrow trade deficit of $5 billion in April, against $8.7 billion in April last year, and substantially lower than the peak of $13 billion in August 2008.
The trade deficit measures the excess of imports over exports.
This decline will continue until September and we hope that thereafter, we would see a consolidation and improvement in exports, said commerce secretary GK Pillai on Monday. After an impressive growth rate of over 30% in the first six months of 2008-09, exports started contracting since October, the year ending with a gain of a mere 3.4%.
Export growth is expected to remain flat in 2009-10, minister of state for commerce & industry Jyotiraditya Scindia said after taking charge on Monday. The key priority for the ministry will be revival of export and manufacturing sectors, Scindia added.
Pillai said Indias exports in 2009-10 would remain in the $170-billion range. (With) rising oil product prices, the trade deficit for the current fiscal would remain at $100 billion compared with last year's $120 billion, he said.
The Federation of Indian Export Organisations said inventories with foreign buyers were depleting and exporters have started receiving orders. Demand for low-price articles is increasing, but there are still constraints in the middle- and high-class segments, said FIEO director-general Ajay Sahai.
Even though exports are contracting, relatively robust domestic demand is driving growth, Goldman Sachs said, projecting investment demand to pick up from July.