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Alarming trade deficit/depressing India’s exports

Exports for the first month of the calendar year 2018 recorded $24.38 billion. Data released by the commerce ministry can be interpreted in two ways. Year-on-year, there is a 9.07 per cent growth from $22.35 billion recorded during January, 2017, but as against previous month of December 2017 when exports touched $27.03 billion, this shows a drop of 9.80 per cent.

During October/November, exports had stood at $23.09 billion and $26.2 billion. Thus when viewed from this angle, growth is depressing. SME and labour intensive sectors such as garments, carpets, handicrafts and man-made textiles are not reporting growth. The drop in exports of cotton textile by 16 per cent y-o-y, apparel by around 14 per cent y-o-y and man-made textiles by 7 per cent y-o-y is again a sad state of affair.

It may be noted that exports of petroleum product contributed to around 6 per cent of the total January export figures. Trade deficit for January is again at an alarming level. It touched a near 56-month high of $16.3 billion in January, when compared to $9.90 billion in the same period last year. This increase is mainly due to a 26.1 per cent increase in imports to USD 40.68 billion largely due to enhanced import of crude oil.

During the first 10 months of the fiscal, the gap widened to $131 billion when compared to $88 billion during the same year ago period. If this trend continues, trade deficit in this fiscal may reach $ 150 billion. Exporters have been crying horse about delay in refund of input tax credits that are stifling growth of the sector. An exporter’s body has also urged the government to look into the refund issues and clear all cases by 31 March, 2018. The same body had noted that exports credit had recorded a fall of -2.5 per cent in 2016-2017 and a y-o-y decline of -8.7 per cent in 2017. Thus, one can clearly see that government intervention is the need of the day.