Indian Trade Deficit Widened by 79 Percent

If the recent government figures are taken into account, India's merchandise exports grew year-on-year by 23 per cent to $10.57 billion in April, the first month of the present financial year but on the other hand imports grew by as 40.7 per cent over the same period. This has widened the trade deficit by as much as 79 percent.

According to experts, the recent appreciation in the value of the rupee, which has risen by about 10 per cent since the new fiscal year began, did not quite show up in the figure apparently linked to shipments booked earlier. "Exporters also hedge their risks to cushion the adverse impact of the currency movement on their competitiveness," said Gundappa Vishwanath, Financial expert in talk with The India Street.

Statistic wise: On a month-on-month level,exports fell in April from $12.58 billion in March. Though, in the previous year, too, exports in April, at $8.59 billion, had fallen from $10.59 billion in March, pretty much demonstrating a seasonal movement than one induced by currency fluctuation.

According to sources, Commerce Minister Kamal Nath has asked exporters to come up with recommendations so that the government could come up with a package to soften the impact of the strong rupee.Remember that imports rose 40.7 per cent in April to $17.63 billion from$12.53 billion a year earlier.

Talking in terms of rupee, exports grew by 15.4per cent year-on-year to Rs. 44,572.18 crore in the month of April, while imports grew by 31.9 per cent. If the trend continues at this level, the average export realisation would be around Rs. 42 rupees per US dollar, which is above the current rate of around Rs 40.5.

Furthermore, non-oil imports rose by as much as 54.3 per cent in the month at $13.2 billion, demonstrating a higher hunger for overseas goods in the growing economy, which consumes more raw materials to feed growth while increasing affluence and a weaker dollar also make many imported goods more affordable.

With imports in the upswing, the trade deficit for April 2007 is estimated at $ 7.06 billion, up 79 per cent from $3.94billion a year ago. Speaking exclusively to The India Street at an awards function organized by the Engineering Exports Promotion Council, the Commerce Minister was of the view that employment-intensive industries, which do not have high import dependence, need to be supported.

'Industry should give specific ideas on which the government can work so that a package can be formulated for them,' said Kamal Nath asserting that the government does not artificially calibrate the rupee. Initial signs are that the proposed package could be in the form of a scheme to refund local taxes that exporters have to pay. Indian government is pressing hard for greater access to Indian exporters to the developed markets at the World Trade Organisation.