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  1. Challenging year ahead for Indian economy, as trade deficit set to spiral despite healthy exports growth

Challenging year ahead for Indian economy, as trade deficit set to spiral despite healthy exports growth

CII CEOs Opinion Poll: 61 per cent of the participating CEOs expect trade deficit will rise in 2018-19, with a substantial 63 per cent expecting imports to grow faster in 2018-19 than the rate of 21.2 per cent in 2017-18.

By: | Published: June 14, 2018 2:58 PM
India's trade deficit narrowed in February India’s trade deficit will continue to increase in 2018-19 despite faster exports growth, as imports are expected to increase at a much higher rate, believe the country’s top business leaders.

India’s trade deficit will continue to increase in 2018-19 despite faster exports growth, as imports are expected to increase at a much higher rate, believe the country’s top business leaders. As much as 61 per cent of the participants of a recent CII CEOs Opinion Poll believe that trade deficit will rise in 2018-19, with a substantial 63 per cent of the participating chief executives expecting imports to grow faster in 2018-19 than the rate of 21.2 per cent in 2017-18.

Compared to the 63 per cent CEOs expecting imports to rise, 55 per cent believed that exports growth will pick up in 2018-19 over the pace of 9.9 per cent in 2017-18, showed the poll organised by the Confederation of Indian Industry (CII). According to RBI’s recent balance of payments data, India’s current account deficit for the full year 2017-18 increased to 1.9 per cent of gross domestic product (GDP) in 2017-18 from 0.6 per cent in 2016-17 on the back of a widening of the trade deficit. In the fourth quarter of 2017-18, India’s trade deficit increased to US$ 160 billion from US$ 112.4 billion in 2016-17.

“Exports registered 10 per cent growth over 2017-18 as the global economy is recovering and we expect the momentum to pick over the current year,” said Rakesh Bharti Mittal, President of CII. “Going forward, we must leverage stronger overseas demand and shifting global value chains through trade facilitation and competitive products,” Mittal said. Earlier in the month, the Federation of Indian Exports Organisation had said that Indian exports — which hovered around $300 billion — should exhibit 15-20 per cent growth so as to reach around $350 billion during FY19.

While trade deficit is set to increase, top executives were optimistic on the growth of the economy as 82 per cent of the CEOs voted for GDP growth to be higher than 7 per cent for 2018-19, with 10 per cent of them expecting growth to be above 7.5 per cent. Capacity utilisation was expected to increase going forward from the current 74 per cent by 82 per cent of the respondents, while 92 per cent of CEOs polled expect further increase in consumption demand implying surge in investments going forward. The poll revealed that 60 per cent of CEOs expect private investments to increase during the coming year.

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