New Delhi: Imports growth in October slipped to single digits and the lowest level in seven years, data showed on Monday, prompting fears industrial activity has begun moderating in Asia’s third-largest economy.
Industrial output growth unexpectedly had slowed to 4.4% in September from a year ago, led by a decline in capital goods production.
Imports growth in October dipped to 6.8% to $27.7 billion from a year ago, the slowest since September 2003, trade secretary Rahul Khullar told reporters.
Analysts said a slowdown in non-oil import growth, which remained steady even during the global recession, is an indication of easing industrial expansion and demand in the economy, expected to grow at 8.5% this fiscal year.
“The imports growth has slowed down despite rupee appreciation, confirming earlier apprehensions that there could be a slowdown in industrial demand in the economy,” said N.R.Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a Delhi-based think-tank.
He forecast industrial output growth to moderate to 8-9% this fiscal year, from an earlier average growth of 13-14% seen in the early months of the year.
The rupee has gained 3.3% year-to-date mainly due to a surge in capital inflows by foreign funds in the stock and debt markets, totalling about $39 billion, data published by the Securities and Exchange Board of India shows.
However, despite a slowdown in imports and a pick-up in exports, Khullar cautioned that global crude prices could rise soon, but that he did not expect the trade deficit to surpass $135 billion in 2010/11.
The trade deficit for October stood at $9.7 billion compared with $9.12 billion in September, while exports rose an annual 21.3% to $18 billion, Khullar said.
Analysts say industrial output growth has been affected by the hike in interest rates and inflation, leading to a slowdown in demand for imported raw material and machinery.
Exports are expected to touch $200 billion this fiscal year, growing at about 15%.