The trade deficit narrowed to $10.9 billion in August on the back of a 13 per cent growth in exports, and a nearly 70 per cent decline in gold imports.
The announcement of a 12.97 per cent growth in exports and continued decline in gold imports are being interpreted as signs of economic stability in official circles.
Exports rose for the second month in a row and stood at $26.14 billion. Imports declined by 0.68 per cent to $37 billion. Following a clampdown on gold imports by the government in shape of hiked customs duty, gold imports dipped to $0.65 billion in August from $2.2 billion in the previous month.
“We are getting indications that things are improving in Europe. In the U.S. also, economic condition is better. So, signs of stability in the major economies, including the U.K., and the positive growth in the U.S. will lead to increase in demand,” Commerce and Industry Minister Anand Sharma told reporters here on Tuesday.
Stating that diversification to new export markets had also paid rich dividends, Mr. Sharma said that new markets such as Asia-Pacific, Africa and South America had helped in boosting exports.
He 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.
Mr. Sharma indicated that those sectors which were lagging behind in terms of exports would get further assistance. “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 per cent at $124.42 billion. Imports, too, grew by 1.72 per cent to $197.79 billion, leaving a trade deficit of $73.36 billion.
Oil imports in August grew by 17.88 per cent to $15.1 billion. The last time the trade deficit had narrowed substantially was in March, when it touched $10.3 billion. Trade deficits have been fuelled by high imports of gold and crude oil, contributing to the widening current account deficit (CAD), which touched an all-time high of 4.8 per cent of GDP, or $88.2 billion, in 2012-13. However, non-oil imports declined by 10.4 per cent to $21.9 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 $32 billion. “We are looking at all possible means to take up manufacturing of all electronic products. IT investment regions have been developed. The Japanese industry is very keen to establish dedicated electronic parks. Until we start manufacturing, these increasing electronic imports are also a drain when it comes to imports,” he said. However, he ruled out curtailing imports of computer chips, saying that till there was domestic manufacturing happening, such imports could not be shut.
Mr. Sharma indicated that Commerce Ministry was working on ways to restrict imports of non-essential goods. According to the Minister, high coal imports had also pushed trade deficit and CAD. “We did get adversely impacted because of development on the coal front. India is a country with abundant coal reserves. But we ended up importing coal worth $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.