Trade deficit narrows to 17-month low in February

NEW DELHI: India’s trade deficit narrowed to a 17-month low of $9.6 billion in February as merchandise imports fell on the back of lower crude oil prices.

The trade deficit had stood at $9 billion in September 2017.

Exports growth was relatively tepid at 2.44% in February, while imports contracted 5.41% in dollar terms, according to data released by the commerce ministry on Friday.

In rupee terms, however, exports and imports expanded at 13.34% and 4.66% respectively, mostly because of depreciation in the rupee.

So far this year, the rupee has weakened 2.07%, the worst performer among Asian currencies.

Cumulatively, during the first 11 months of the fiscal year 2019 (April-february), exports and imports grew at 8.85% and 9.75% respectively, while the trade deficit expanded to $165.5 billion from $148.6 billion during the same period a year ago. Exports have done well despite increasing protectionism, tough global conditions, and constraints on the domestic front, said Ganesh Kumar Gupta, president of the Federation of Indian Export Organizations.

“Economies across Asia, especially China and the Southeast Asian nations, have been showing signs of sluggishness with contraction in manufacturing due to the slowdown in the global trade and a fragile world economy,” he said.

China’s exports contracted 20.7% in February, the largest decline in three years, while imports fell 5.2%, stirring fears of a trade recession.

In February, exports of Indian pharmaceuticals (16.1%), chemicals (4.1%), engi-

neering goods (1.7%), and ready-made garments (7.2%) rose, while shipments of gems and jewellery (-2.1%) and petroleum products (-7.7%) contracted.

Growth in non-oil, non-gems and jewellery imports, an indicator of the state of economic activity in the country, contracted 3.7% in February, led by transport equipment (-19.6%), electronic goods (-6.5%) and plastic (-1.9%).

Import of crude oil slipped by 8% as global Brent price decreased by 1.97% in February. Gold imports contracted by 10.8%, reflecting a trouble in the gems and jewellery sector.

Other macro-indicators including factory output and the gross domestic product (GDP) also point toward a slowdown in overall economic activity.

The index of industrial production grew 1.7% in January, while gross domestic product in the December quarter slowed to a five-quarter low at 6.6%.

The World Trade Organization (WTO) had last month projected that trade growth is expected to slow from 3.9% in 2018 to 3.7% in 2019, cautioning that these estimates could be revised downward if trade conditions continue to deteriorate.

“This sustained loss of momentum highlights the urgency of reducing trade tensions, which together with continued political risks and financial volatility could foreshadow a broader economic downturn,” the WTO said.

The International Monetary Fund (IMF) in January had said risks to global growth tilt to the downside, and revised 2019 growth projection downwards by 20 basis points to 3.5% on the back of sustained trade tensions between the US and China.

However, IMF said India’s economy is poised to pick up from 7% a year ago to 7.5% in 2019-20, benefiting from lower oil prices and a slower pace of monetary tightening than previously expected, as inflation pressures ease.