New Delhi: The latest trade data released on 3 March shows that there was a sudden surge in India’s imports, especially non-oil imports, in January—a 46.57% jump in rupee terms and 65.05% spike in dollar terms.
While economists maintain that this sharp increase is probably one-off, they argue that it also points to a larger trend where non-oil imports, particularly of primary food articles, have grown in double digits in the first 10 months of the current fiscal. Coincidentally, it is the same period during which the rupee appreciated by 8.67%. An appreciating rupee against the dollar means that the import price in rupee terms is that much lower.
Biswajit Dhar, head of the Centre for WTO Studies at the Indian Institute of Foreign Trade, said not only is India becoming more import-dependent but there are some structural changes also taking place. “The economy is slowing down and it is not the capital goods import that is increasing,” he said. “In fact, there are supply constraints in the agriculture sector where the import duties are still high. The government is already capping exports of agricultural commodities. The data is a tell-tale sign of the increasing imports of agricultural goods.”
The cumulative value of imports for April 2007-January 2008 was $19.16 billion (Rs7.71 trillion), an increase of 29.63% in dollar terms and 14.74% in rupee terms over the same period last year. Some analysts maintain that there has been a rise in the quantity of imports into the country.
According to N.R. Bhanumurthy, associate professor at the Institute of Economic Growth in Delhi, this is evident from the fact that the difference between the import growth in dollar terms and in rupee terms is more than the extent of rupee appreciation.
Among the top 25 imported commodity groups by value for April-October, imports of iron and steel grew by 35.81% in rupee terms and 52.60% in dollar terms; transport equipment grew by 35.11% in rupee terms and 51.81% in dollar terms; metal manufactured goods grew by 32.88% in rupee terms and 49.30% in dollar terms.
“The (domestic) prices of primary articles like edible oils have been growing at a rate higher than the Wholesale Price Index (WPI). The surge in imports is not due to more capital goods being imported. It could be politically difficult for the government to accept,” Bhanumurthy noted.
WPI is a weekly measure of wholesale price movement for the economy and is widely used to measure inflation in the economy. The WPI inflation, led by primary food articles, for the week ended 1 March, stood at 5.11%, which was a nine-month high. Inflation has for the second week in a row remained above the 5% mark, which is the upper limit for inflation acceptable to the Reserve Bank of India.
The import growth of edible oils in dollar and rupee terms in April-October, the period for which the latest disaggregated data is available, is 22.45% and 8.98%, respectively.
The government, conscious of the growing pressure from inflation in food articles, has already initiated some supply side management measures. On Tuesday, it prohibited the export of all edible oils with immediate effect for the next one year.
According to Bhanumurthy, the increased prices and imports of the primary articles are reflective of the the supply constraints in the domestic economy which are beginning to have an impact. “As these prices have started to rise, so have their imports,” he added.
However, a commerce ministry official, who did not wish to be identified, while agreeing that the non-oil import surge in January is “exceptional”, maintained that it is the capital goods that are being imported more.