Trade deficit at 7-month low in September as exports soar
New Delhi: India’s merchandise exports grew at the fastest pace in six months in September, helping cut the trade deficit to a seventh-month low, belying concerns that implementation of the goods and services tax (GST) from 1 July may blunt export competitiveness.
Exports rose 25.7% to $28.6 billion last month, and the trade gap narrowed to $8.9 billion. “India’s growth story is back! During Sep’17, all the top ten commodity groups of export exhibited positive growth over Sep’16, comprising 82.14% share in total exports,” commerce minister Suresh Prabhu tweeted.
Exporters have complained that the imposition of integrated GST and delays in refund of input tax credits were hurting overseas shipments, prompting GST Council last week to continue two pre-GST era schemes that allow duty-free sourcing of materials for export production until March 2018. The move is expected to improve the liquidity of exporters by preventing working capital from getting locked up in tax procedures.
The council also decided to clear all tax refund claims of exporters for July by 10 October and for August by 18 October. It introduced a 0.1% GST rate for merchant exporters, offering relief from the full applicable GST rates on procurements. Merchant exporters do not make products themselves but procure from others for shipping overseas.
In September, exports of engineering goods (44.2%), gems and jewellery (7.1%), petroleum products (39.7%), chemicals (46.1%), ready-made garments (29.4%), and drugs and pharmaceuticals (14.7%) grew at a brisk pace.
Imports of vegetable oil (11.6%), coal (48%), petroleum products (18.5%), chemicals (20.3%), plastic (21.9%), precious stones (56.9%), iron and steel (35%), machinery (16.4%) and electronic goods (41%) also grew at a faster pace.
During the month, imports of transport equipment, considered an indicator of demand in the economy, declined 27.6%; gold imports fell by 5%.
President of the Federation of Indian Exporters Organisation Ganesh Kumar Gupta said he expects to see much more impressive growth in the coming months, with the GST Council addressing the liquidity concerns of exporters.
“Though global uncertainties, rupee volatility and protectionism are still some of the major hurdles to our current growth in exports, we are definitely on course to achieve about $310 billion exports during the fiscal as manufacturing data is also showing a rebound,” he added.
The Index of Industrial Production, or IIP, rose by a nine-month high of 4.3% in August, data released by the statistics department on Thursday showed.
In the first half of the financial year (April-September), exports grew 11.5% to $147.2 billion, while imports rose 25.1% to $219.3 billion, leading to a trade deficit of $72.1 billion during the period.
Prabhu has announced that the government is working on a sector-wise export promotion strategy.
Commerce secretary Rita Teaotia said last week that the department may have to revise down its goods and services export target of $900 billion by 2020 set in the foreign trade policy (FTP) because of slow growth in exports in the initial years of the FTP.