21.11.15

Trade Gap Shrinks

India's exports declined for the eleventh month running in October, highlighting the stiff competition faced by the country in a weak global economy , but a sharper fall in imports helped keep the country's trade deficit in check. Exports fell 17.5% year on year in October at $21.35 billion, indicating that tepid global demand continues to be a drag on economic recovery .
Imports declined 21.15% to $31.12 billion, yielding a trade deficit of $9.7 billion, an eight-month low and down from $10.47 billion in September and $13.35 billion in the year ago period.
“The decline in exports is worse than even that during the global slowdown. With this, reaching even $300 billion of exports this year looks difficult,“ said Ajay Sahai, director-general of the Federation of Indian Export Organisations. “One can't shift to domestic markets overnight and the benefits of the export incentive schemes are yet to trickle down,“ he said. Outward shipments declined in 20 out of the 30 industries, led by iron ore, the data showed. Sluggish global demand, an overvalued rupee, declining imports from China and devaluation of the Chinese currency have deterred India's exports from growing despite the commerce department expanding export incentive schemes for various products and markets.
Exports in the first seven months of the year were about $154.2 billion. In 2014-15, India's exports had totalled $310.5 billion. Drugs and pharma, tea, cereal preparations, ceramic, minerals, electronics, textiles, carpets, jute, and plastics were the only sectors that posted a growth in exports last month.
Non-oil imports fell to $24.2 billion and were 9.93% lower on year.Non-oil, non-gold imports, seen as a measure of domestic demand, fell 0.57% to $22.75 billion.
The free fall in imports was led by a 60% decline in the imports of gold, 55% in cotton and 45% in oil.This narrowed the trade deficit which was compared with Declining gold imports indicate a combination of rural stress and lower investment demand because of the possibility lower returns going ahead.
Gold imports are expected to reduce due to three gold related schemes launched earlier this month. The Gold Monetization Scheme, Sovereign Gold Bond Scheme, and India Gold Coins are seen as a way to put the gold available with the country to productive use and thereby reduce imports and control the current account deficit.
In ICRA's view, the current account deficit would narrow modestly to $8.5-9.0 billion in the second quarter of the current fiscal from $10 billion a year earlier with much of the savings on the oil account lost to lower non-oil exports and higher gold imports.

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