India’s trade deficit falls to $5.1 bn in March

India’s trade deficit falls to $5.1 bn in March

Trade deficit for FY2016 reduced by 21.4% at $53.8 billion over $68.5 bn in 2015.

The Dollar Business Bureau

India’s trade deficit has fallen for the third month in a row to $5.1 billion in March as both exports and imports have declined 5.5% and 21.6% respectively. As per the official data released by the Ministry of Commerce and Industry, exports have come down continuously for the 16th month to reach $22.7 billion in March, while the imports have also dipped to $27.8 billion last month leading to a trade gap of $11.4 billion in March 2015.

Explaining the tepid global demand for exports, the Commerce Ministry said, “The trend of falling exports is in tandem with other major world economies. The growth in exports have fallen for USA (10.81 per cent), European Union (7.40 per cent), China (11.37 per cent) and Japan (12.85 per cent) for January 2016 over the corresponding period previous year as per World Trade Organization (WTO) statistics.”                                                                                                                 

Aditi Nayar, Senior Economist at ICRA said, “The halving of the merchandise trade deficit in March 2016 with respect to March 2015 was predominantly on account of a sharp decline in gold imports following the jewellers' post-budget strike as well as lower net oil imports led by both a fall in price and volumes. Although non-oil non-gold imports contracted in March 2016, the healthy growth in imports of some items such as transport equipment and electronic goods signals a nascent uptick in domestic investment and consumption demand.”

She further said, “The one-off plunge in gold imports in March 2015 has contributed to the sharp fall in the merchandise trade deficit, disguising the continuing weakness in non-oil merchandise exports. Some sectors such as gems and jewellery, drugs and pharmaceuticals and electronic goods recorded a y-o-y expansion in March 2016. The contraction in services exports for the fourth consecutive month and the y-o-y decline in the services trade surplus for the third month in a row in February 2016, are a matter of concern.”

“With the slump in gold imports in March 2016 narrowing the merchandise trade deficit, the current account balance may record a small surplus in Q4 FY 2016, despite the shrinking of the services trade surplus in Jan-Feb 2016. As a result, the current account deficit for FY 2016 is likely to be restricted to around $20 billion. Notwithstanding the risk posed by lower remittances, benign commodity prices are expected to curtail India's current account deficit under $25 billion in FY2017,” she added.

Taking merchandise and services together, overall trade deficit for FY 2016 has fallen by 21.4 per cent at $53.8 billion as compared to $68.5 billion over same period last year as per the data released by the Reserve Bank on Monday.

The Dollar Business Bureau - Apr 19, 2016 12:00 IST