India’s trade gap narrowed to a five month low in September, driven by slower growth in imports even as exports contracted compared to a year ago.
This decline is entirely due to the base effect resulting from September 2017 being an abnormally high growth month of about 26 percent in dollar terms due to the imminent cut off then for drawbacks at pre-GST rates...Exporters continue to be resurgent with their realised incomes having gone up by almost 10 percent.Government Statement
- Exports of petroleum products rose 26.76 percent to $4.4 billion.
- Exports of drugs and pharmaceuticals went up 3.8 percent to $1.6 billion.
- Engineering goods exports fell 4 percent to $6.99 billion.
- Readymade garment exports declined 33 percent to $1.1 billion.
- Gems and jewellery exports fell 21.7 percent to $3.7 billion.
Relief For Rupee?
The leaner trade shortfall could come as a relief for Prime Minister Narendra Modi’s as the recent import curbs announced by his administration have failed to stem the rout in the rupee. Economists fear that the widening trade deficit could push the current account deficit to between 2.5-3 percent of GDP this year. Meanwhile, FPI’s have withdrawn more than $12 billion so far this fiscal year, leading to concerns about financing the current account deficit.
Today’s data may not yet reflect a change in trend, said Aditi Nayar, economist at ICRA. Nayar points out that the absolute widening in the deficit levels between September last year and this year is in line with the trend seen between April and August. “This underscores that the correction in September 2018 relative to the size of the trade deficit in the previous three months, has been driven by seasonal factors, and is therefore likely to offer only temporary relief,” Nayar said.
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