August 2019: Trade deficit narrows to $13.45 b

India’s imports shrank by 36-month low of 13.4% on year in August, led by non-oil and non-gold sectors, indicating weak domestic demand in a slowing economy. Exports, too, declined for the second time in three months as global trade tensions and sluggish demand brought down shipments by 6.05%.

Exports slipped to $26.13 billion last month, pulled down by a decline in shipment of traditional, labour intensive sectors including cotton yarn, gems & jewellery, petroleum products, carpets, and handicrafts.

A sharper decline of imports to $39.58 helped the country lower the trade deficit to $13.45 billion in August from $17.92 billion a year ago. However, the trade gap widened marginally from $13.43 billion in July.

This was the worst decline in imports since August 2016 when imports fell 13.8% on year.

India’s economic growth had plunged to a 25-quarter low of 5% in the June quarter. Private consumption growth plunged to 3.1% in the quarter from 7.2% in the trailing quarter.

Non-oil and non-gold imports fell 9.33% to $27.3 billion in August. Oil imports declined 8.9% to $10.9 billion while gold imports fell 62.5% to $1.37 billion from the year earlier.

The increase in customs duty on gold and the recent spike in prices dampened imports.

Imports of electronics goods, a major import item, declined 4.12% in August.

According to official data, 22 out of the 30 export sectors registered a decline year on year in August.

Experts partly attributed the decline in exports to the US terminating preferential tariffs to India under the Generalised System of Preferences effective June 5.

US-China trade war, Brexit and developments in Iran further aggravated the problem of the world economy, the organisation said.

The World Trade Organisation had in April cut the global trade growth forecast for 2019 to 2.6% from 3% in 2018 on account of rising trade tensions and increased economic uncertainty.

In first five months of the fiscal, India’s exports fell 1.53% to $133.54 billion while imports declined 5.68% to $206.39 billion.

However, electronics exports increased 46% to $1.01 billion in August. FIEO said the uncertainty attached has also affected the flow of investment and added to currency volatility.

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