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India's exports fall in January, so do imports

India's exports fall in January, so do imports

NEW DELHI: India's trade deficit touched a 56-month high in January, driven by a sharp rise in imports of petroleum, chemicals, silver, pearls and machine tools, even as exports expanded for the third consecutive month. 

A 9% rise in exports at $24.3 billion was outweighed by a 26% increase in imports at $40.6 billion, leaving a trade gap of $16.3 billion, the highest since May 2013. 

A 9% rise in exports at $24.3 billion was outweighed by a 26% increase in imports at $40.6 billion, leaving a trade gap of $16.3 billion, the highest since May 2013. 

Imports of pearls and precious and semi-precious stones jumped 55.71% to $2.4 billion. However, gold imports declined 22% to $1.59 billion last month. 

"The trade deficit is alarming. At this rate, trade deficit will touch $150 billion this year," Federation of Indian Export Organisations (FIEO) director-general Ajay Sahai said. 

In the April-January period, trade balance was $103.7 billion. "Imports of finished goods are being encouraged because the incidence of tax borne earlier is no longer there. This is a cause of worry," Sahai added. 

Five sectors — coal, chemicals, precious metals, petroleum and machinery — showed at least $500 million of increase in imports from a year earlier. 

"With the merchandise trade deficit for January 2018 being sharply higher than expected, we have revised our forecast for the FY2018 current account deficit to $47-50 billion or nearly 2% of GDP, from the earlier expectation of $42-44 billion," said Aditi Nayar, principal economist at ICRA. 

On exports side, outward shipments increased in 20 out of 30 sectors, but declined in traditional sectors like yarn and readymade garments whose competitive edge could have been blunted by an appreciating rupee. 

Exports of readymade garments fell 8.4% to $1.39 billion, while cotton yarn and fabric shipment declined 9.6% to $0.84 billion. "We are losing our competitiveness. There is a major skilling issue here," Sahai said. Major commodity groups which showed growth in exports were engineering goods (15.77%), petroleum products (39.5%), gems & jewellery (0.89%), organic & inorganic chemicals (33.6%) and drugs & pharmaceuticals (8.6%), according to data released by the commerce ministry. 

A slowdown in exports from labour-intensive sectors like garments, carpets, handicrafts and man-made textiles was primarily due to liquidity crunch as tax refunds have been getting blocked since the introduction of goods and services tax, FIEO said in a statement. 

Exporters urged the government to look into the refund issue "seriously" by undertaking a drive so as to clear all cases by March 31, 2018. 

"Alternatively, banks may be asked to finance exporters against the pending GST refund claims with interest to be borne by the government," FIEO said. 


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