Trade deficit hits 17-month low in Feb on back of lowering crude rates

Chennai: India’s trade deficit narrowed to a 17-month low of $9.6 billion in February as merchandise imports fell on the back of lower crude oil prices. The trade deficit had stood at $9 billion in the latter half of 2017.

Data released by the Commerce Ministry stated that in rupee terms, exports and imports grew at 13.34 per cent and 4.66 per cent respectively, a causality of depreciation in the rupee value.

It must be noted that, so far this year, the rupee has weakened 2.07 per cent, and has become the worst performer among Asian currencies.

Growth of exports was showed relative rise at 2.44 per cent in February, while imports contracted 5.41 per cent in dollar terms.

Cumulatively, during the first 11 months of the fiscal year 2019 (April-February), exports and imports grew at 8.85 per cent and 9.75 per cent, respectively, while the trade deficit expanded to $165.5 billion from $148.6 billion during the same period a year ago, showed the data.

In the same time, China’s exports contracted 20.7 per cent, while imports fell 5.2 per cent. The export decline was the largest in three years leading to speculations of a possible trade recession.

In the month of February, exports areas such as pharmaceuticals (16.1 per cent), chemicals (4.1 per cent), engineering goods (1.7 per cent), and ready-made garments (7.2 per cent) rose. Witnessing decline were shipments of gems and jewellery (-2.1 per cent) and petroleum products (-7.7 per cent).

The index of industrial production grew 1.7 per cent in January, while gross domestic product in the December quarter slowed to a five-quarter low at 6.6 per cent.

Growth in non-oil, non-gems and jewellery imports, an indicator of the state of economic activity in the country, contracted 3.7 per cent in February.

Led by transport equipment (-19.6 per cent), electronic goods (-6.5 per cent) and plastic (-1.9 per cent), the segment of non-oil, non-gems and jewellery imports saw degrowth.

With Brent price reducing, import of crude oil reduced by eight per cent while gold imports contracted by 10.8 per cent.

The total gems and jewellery sector spell trouble in the making as exports reduced big time, according to the data from the Commerce Ministry.

Expert Talk
The World Trade Organization (WTO) recently projected that trade growth is expected to slow from 3.9 per cent in 2018 to 3.7 per cent in 2019.

“This sustained loss of momentum highlights the urgency of reducing trade tensions, which together with continued political risks and financial volatility could foreshadow a broader economic downturn,” the World Trade Organization said.

The International Monetary Fund (IMF) in January had said risks to global growth tilt to the downside, and revised 2019 growth projection downwards by 20 basis points to 3.5 per cent on the back of sustained trade tensions between the US and China. It also stated that India’s economy will reach 7.5 per cent in 2019-20.

NT Bureau