The pattern of the country’s merchandise trade is going through a structural shift, according to an analysis by the Prime Minister’s Economic Advisory Council (PMEAC).

The analysis revealed that over a six-year period from 2006-07 to 2012-13, the share of traditional destinations, such as Europe and North America, in India’s total trade (exports and imports) declined, while that of Latin America, Africa and Asia went up.

In its latest review of the economy, the PMEAC also raised concerns over exports to Asean member countries Japan and South Korea falling despite New Delhi inking a free-trade agreements (FTA) with them.

PMEAC chairman C Rangarajan said controlling the current account deficit (CAD) was the government’s main concern in the medium term, while, in the short term, capital flows need to be encouraged by procedural easing and removal of restrictions in certain areas. The CAD is estimated to be $94 billion (5.1% of the GDP) in 2012-13 and could touch $100 billion (4.7% of the GDP) in 2013-14.

Blaming high gold, oil and coal imports for the high CAD, the report listed out several measures to contain it at around $90-95 billion (4.2-4.4% of GDP) in 2013-14 and further to 3-3.5% of the GDP in the next fiscal.

These include containing gold imports by $5 billion, so that it does not exceed $40 billion in 2013-14. Producing more domestic coal would help bring down thermal coal imports by $2-3 billion in 2013-14 and price reform would ensure net oil imports to be lower by $2-3 billion.

However, Rangajaran said reducing oil dependence will be difficult as imports of the commodity will increase as the economy grows. He mooted encouraging more capital flows and making financial instruments more attractive to wean away people from gold.

As per the review, during 2006-07 to 2012-13, the share of Europe in India?s external trade fell 4.2 percentage points to 17.9% as well as that of North America (including US and Canada) slipped by 2 percentage points to 9.2%.

However, the share of Africa in India’s total trade went up by 2.2 percentage points to 16.5%, that of Latin America up by 2.2 percentage points to 5.1%, and the rest of Asia by 2.7 percentage points to 56.4%.

A closer look solely at India’s merchandise exports shows that the share of European Union has declined from 21.2% to 17% during the six-year period, in line with the economic difficulties in the region.

The share of North America in India?s exports also fell from 16.2% to 14.1% during this period, in which there was a drop of two percentage points in exports to the US.

Meanwhile, thanks to the market diversification strategy adopted by exporters and government’s incentives, exports to Latin America have rose from 3% to 4.6%.

The council also said exports to Africa rose steadily during the period. The share of exports to the GCC area in West Asia went up from 13% to 17%. On the other hand, exports

to Northeast Asian markets have fallen 2.1 percentage points mostly in China & Hong Kong [(?) 1.7 percentage points] and South Korea [(?) 0.5 percentage points]. It noted that the drop in exports to China is partly due to the near cessation of India’s iron ore exports, which were mostly to China.

It said India?s exports to Asean countries fell nearly 12% in 2012-13, which is a matter of concern. ?This was a rapidly growing market in the previous two years and is a region where we have entered into FTA and have a range of common interests and logistic advantages,? it pointed out. Exports to Japan and South Korea also fell. ?We have FTA arrangements with Japan and South Korea and it seems that there is considerable potential which remains to be developed. This must be seen as a near term challenge ? from the facilitation side by government, and as a business proposition for industry,? the report added.