Trade deficit widens as imports rise 33%

Trade deficit widens as imports rise 33%

India’s trade deficit widened in August to $6.9 billion (about Rs27,393 crore), rising by 37% over July, as Indian companies imported more ­machinery, partly encouraged by a rising rupee, and to meet the demands of a growing economy.

Imports rose strongly by 32.6% over last year to $19.6 billion; exports continued to grow at over 18% to $12.7 billion, a statement from the commerce ministry said.

In rupee terms, however, exports grew only by 4.3% to Rs51,700 crore in August. In the first five months of the current fiscal year, which has seen more than 6% rise in the value of the rupee against the dollar, exports grew only slightly faster at 5.5% to Rs243,600 crore.

Speaking at an awards function of Capexil, an exporters’ body, commerce minister Kamal Nath said exporters had to rise to future challenges by adapting their business strategies, and “by achieving forward and backward linkages with the economy for a positive impact on export growth," according to a press release from the commerce ministry.

Nath also asked companies to look at export deals in currencies other than the dollar. The rupee has appreciated against other major currencies too, though relatively less than against the dollar.

Though many analysts say that Indian exporters will manage to overcome the the effect of the rising rupee, exporters of traditional items such as gems and jewellery, and textiles are concerned about losing out to other regional exporters. China, the biggest of such competitors, reported a 33% rise in its trade surplus in August to $24.9 billion over a year ago.

Non-oil imports grew faster at close to 40% in August to $13.5 billion, and by almost 43% in the first five months of the current year to $46.3 billion.

Chetan Ahya, an economist with Morgan Stanley, said: “The trailing four-quarter trade deficit has shot up to S$69.5 billion compared with $54.8 billion in the four quarters ended June 2006." With exports growing slower, cumulative trade deficit in the first five months of the current year was $32.5 billion, a 63% increase over a year ago.

Rajeev Malik, an economist with JPMorgan Chase, said “a higher oil import bill and slower growth in exports owing to significant rupee appreciation will widen" both the trade and current account deficits this year.

Malik added oil imports will rise later in the year, as global crude oil prices are already on their way up.