Export growth rate dips by half in Dec; trade deficit at 3-year high
The pace of growth in export declined by a little more than half in December, compared to November, even as these grew by double-digits for a second month in a row. At $27 billion, export was up 12.4 per cent in December, compared to 30.5 per cent growth in November. The December figure has again prompted exporters to air grievances about refunds in the goods and services tax (GST) regime. However, they say the country is on course to meet the target of $300 billion in 2017-18.
The growth rate declined in refinery products, engineering, electronics, and gems & jewellery, among others. For instance, oil export growth declined to 25.1 per cent, from 47.7 per cent in November; engineering goods to 25.3 per cent, from 43.8 per cent; electronics to 4.8 per cent, from 26 per cent; and gems & jewellery to 2.4 per cent, from 32.7 per cent.
Agriculture produce added to the items which contracted in December, due to subdued demand globally.
Import rose 21.1 per cent in December to $41.9 billion due to more of gold and oil. The import rise was 19.6 per cent the previous month.
Oil import was 34.9 per cent higher at $10.3 billion. The rise in November had been 39.1 per cent, to $9.5 billion. Gold import was up 71.5 per cent to $3.4 billion; that was after a drop of 25.9 per cent to $3.3 billion in November.
As such, non-oil and non-gold imports, taken as a sign for industrial demand, rose 12.9 per cent in December, after 22.6 per cent growth in November. This implies that cheer over a 17-month high in Index of Industrial Production (IIP) growth in November at over eight per cent might prove exceptional. Or at least a strong recovery might not be there in December.
The trade deficit widened to $14.9 billion, against $13.8 billion in November and $10.5 billion in December 2016. The deficit broadened to $114.9 billion in the first nine months of the current financial year against $78.4 billion in the corresponding period the previous year.
A sharp pick-up in growth of services export to a 44-month high of 15.4 per cent in November, from 7.9 per cent in October 2017 had helped boost the services surplus to $5.7 billion in November. This might offset the impact of the trade deficit on the current account deficit (CAD).
“Overall, the CAD is likely to widen nearly three-fold to $42-44 billion in FY18 from $15 billion in FY17,” said Aditi Nayar, principal economist, Icra. Federation of Indian Export Organisations President Ganesh Kumar Gupta said the rise in trade deficit was alarming and the import profile needed to be analysed.
As many as nine products out of 30 major ones tracked saw contraction in export year-on-year in December, compared to five in November. Agricultural export such as cereals other than rice, cashew and oilseeds were among the additions. Gupta said while refund of integrated GST was getting resolved, except for inland container depots, exporters were having huge problems in getting refund on input tax credits, due to “ignorance and a recalcitrant approach” of the tax authorities.