After the elections to state assemblies, the government might have to look at policy steps to put a lid on certain imports, commerce secretary Rahul Khullar said. The rising import bill (and its consistent outpacing of exports) is straining India’s balance of trade in goods and by extension, the current account deficit that includes other inflows like remittances, software/BPO inflows and investment income from abroad.
The balance of trade in goods is pegged at $165 billion for 2011-12 compared with $104 billion in 2010-11. According to the official, the current account deficit at the end of the current fiscal year is likely to be around $60 billion or 3.4% of the GDP, the worst in recent years.
For a fast-growing economy, imports outpacing exports might not be bad per se, but Khullar told FE that imports of four commodities (crude oil, vegetable oils, fertilisers and coal) that the country cannot do without have ensured that import bill kept on rising. ?As investment demand dries up, imports of capital goods, etc, will also come down. But since we are an import-dependent economy in terms of these four commodities…, to see a decline in (their) import bill, some decisions need to be taken. My guess is that once these (state) elections are over some decisions on monetary and fiscal policies will be taken,? Khullar said.
In April-January, imports grew by 29.4% as against a rise of 23.5% in exports. Exports had grown 37.5% in 2010-11. The export (and import) growth rates had been spectacular between April-September this fiscal, but there has been deceleration in recent months. ?The incremental import growth rate has also slowed. The January (import) number is smaller than the average (over the year so far)…but since deceleration was faster in exports, the deficit has gone up,? he said. An appreciation of the rupee against the dollar (7% since December-end) would help curb the import bill.
Khullar said this year’s export target of $300 billion was likely to be met, but was guarded about the outlook for 2012-13. ?When the world trade is pegged to grow between 5-7% and (it) is seen collapsing, a 23% growth (of April-January) is pretty good. But since the main sources of a steady demand (read the US and EU markets) are drying up, we must realise that next year is going to be even tougher.?
India had in 2008-09 set a target to reach an export figure of $500 billion for 2013-14. This means an average annual export growth of about 27%. As against this, it has achieved 13.7% growth in 2008-09, 3.6% in 2009-10, 37.5% in 2010-11 and 23.5% during April-January this year.
Although global commodity prices have seen a slight decline of late, prices are still high, especially for fertilisers, vegetable oil, etc. And no one is willing to bet on crude oil prices.
