The trade deficit in the month of April widened to $13.72 billion as exports grew only by 5.17%. After registering a healthy growth of 9% in January this year, exports took a hit. Following the Rs 13,000 crore Nirav Modi fraud, RBI’s decision to withdraw Letters of Understanding (LoUs) and Letters of Credit (LCs) spelt troubles for exporters especially in labour-intensive sectors of export including gems and jewellery, leather and leather products.
On the April trade data, FIEO President, Ganesh Kumar Gupta said that some sectors are still facing the problem of liquidity as banks and lending agencies have continuously been tightening their lending norms and the flow of GST refund has also slowed down.
“Almost all the labour-intensive sectors of export including gems & jewellery, leather & leather products, RMG of all textiles, jute manufacturing including floor covering, carpets, handicrafts, agri products and many other sectors of exports, dominated by MSMEs are into negative territory,” Ganesh Kumar said.
Only 16 out of 30 major product groups were in positive territory during April 2018 including engineering, organic & inorganic chemicals, drugs & pharmaceuticals, cotton yarn/fabs/made-ups, electronic goods, plastic and linoleum and rice have shown positive exports growth during April 2018.
Assocham had earlier expressed concern over withdrawal of LoUs and LCs. The industry body had said that the LCs and LoUs are an internationally accepted system of global trade. “While we need to ensure safe and sound functioning of the system and not allow loopholes like those in the PNB system of money or guarantee transfer, let banks not over-react and hit the trade and industry,” Assocham had said in February.
Moreover, the cushion that came from the exports of petroleum sector to exports as it declined by 4.5% in April. However, the biggest reason for wider trade deficit is understood to be swelling crude imports bill, which was up by a whopping 41.5%.
Imports grew 4.60% to $39.63 billion in the month on yearly basis. While oil imports were up in the month of April, non-oil imports dipped by 4.3% to $29.21 billion in April 2018. Engineering, chemicals and pharmaceutical exports recorded a growth of 17.63%, 38.48% and 13.56% respectively during the month.
India’s trade data is “indicative of India-specific factors determining the export slowdown, possibly through a loss of competitiveness or deteriorating external conditions for India’s export basket”, the World Bank had said in its latest India Development Report.
“India has experienced a positive export growth, but it remains to be seen whether it is indicative of a definite reversal of this pattern,” the report added.