Exports up 13% in August; trade deficit dips to $11 bn

India's exports rose to a two year high of 13 percent in August on account of improved global situation, enabling trade deficit to fall to a four month low of USD 11 billion, aided by subdued gold imports.

New Delhi: India's exports rose to a two year high of 13 percent in August on account of improved global situation, enabling trade deficit to fall to a four month low of USD 11 billion, aided by subdued gold imports.

Gold imports, which has been pushing up current account deficit and putting pressure on rupee, dipped to USD 0.65 billion in August from USD 2.2 billion in the previous month.

Exports, for the second month in a row, increased by 12.97 percent to USD 26.14 billion, while imports declined by 0.68 percent to USD 37 billion.

"Things are improving in Europe and in the US also economic condition is better. So signs of stability in the major economies including the UK and the positive growth in the US will lead to increase in demand," Commerce and Industry Minister Anand Sharma told reporters here.

He also said that new markets like Asia-Pacific, Africa and South America have helped in pushing India's exports.

The Minister expressed hope that shipments would continue to be in the positive zone for rest of the financial year. All the exporting sectors barring jewellery have shown positive growth in August.

Sharma said the government will further extend incentives to those exporting sectors which are lagging behind.

"...We will take a considered view and make intervention to support those sectors which are lagging behind, and that we shall do it after the review in October," he said.

During April-August, exports were up by 3.89 percent at USD 124.42 billion. Imports too grew by 1.72 percent to USD 197.79 billion, leaving a trade deficit of USD 73.36 billion.

Oil imports in August grew by 17.88 percent to USD 15.1 billion.

The last time trade deficit had narrowed substantially was in March when it touched USD 10.3 billion.

Trade deficits have been fuelled by high imports of gold and crude oil, contributing to the widening CAD, which touched an all-time high of 4.8 percent of GDP, or USD 88.2 billion, in 2012-13.

However, non-oil imports declined by 10.4 percent to USD 21.9 billion, the Minister said.

Sharma expressed hope that trade deficit will decrease this fiscal from the previous fiscal's USD 191 billion.

Besides putting curbs on gold imports, the government is also taking steps to boost electronics manufacturing to reduce its imports. Last year, India imported electronic goods worth USD 32 billion.

"We are looking at all possible means to take up manufacturing of all electronic products. IT investment regions have been developed. Japanese industry is very keen to establish dedicated electronic parks. Until we start manufacturing, this is (increasing electronic imports) also a drain when it comes to imports," he added.

To a question, he said government cannot curtail these imports till chip manufacturing units start operations.

He also said that the Commerce Ministry is working on ways to restrict imports of non-essential goods.

According to the Minister, high coal imports have also pushed trade deficit and CAD.

"We did get adversely impacted because of development in coal front. India is a country with abundant coal reserves. But we ended up importing coal worth USD 16 billion...We need to reverse (the trend of imports) for our national interest and start mining our own coal and make it available for power production," he said.

He also said the commerce ministry is currently engaged in preparing an internal projection figure.

"By November, we will have the projection on the trends, exports, destinations and commodities for the last quarter of this fiscal. That exercise is already underway," he said.

Engineering exports which were registering negative growth till July have also entered the positive zone. The sector contributes about 20 percent to India's total exports.

On gold imports, Sharma said the fall is expected to continue during the coming months and it would not impact the jewellery sector exports as "enough gold is available".

He said steps taken in the past like enhancing rate of interest subsidy for exporters are helping push exports.

"I am sure that we will continue to do well," he added.

On rupee, he said that the depreciation of the domestic currency is not helping exports as 45 percent of shipments have a substantial import content.

"This means that those imports have become costlier then before. Therefore, they offset the possible gains that could have been there," he said. During the last four months, rupee has depreciated about 19 percent.

Oil imports during April-August 2013-14 grew by 5.60 percent to USD 69.67 billion. However non-oil imports declined by 0.3 percent to USD 128.11 billion.

Reacting to exports growth, Apparel Export Promotion Council Chairman A Sakthivel said narrowing trade deficit will surely help in easing current account deficit.

Federation of Indian Export Organisations (FIEO) said exports will only improve in the coming months and are expected to grow by 20 percent in 2013-14.

"In the given situation, government needs to adopt two pronged strategy to support sectors which are still in red like engineering, electronics and gems & jewellery while simultaneously providing additional support to sectors such as textiles, pharma, chemicals and leather," FIEO said.