Govt Monitoring Increase in Trade Deficit: Sharma.

The Commerce and Industry Minister, Mr Anand Sharma, said on Saturday that the Government was “carefully monitoring” the burgeoning trade deficit — which is the outcome of the country's imports of goods exceeding its exports.

However, the Minister pointed out that goods exports are continuing to grow at a healthy pace and claimed that, therefore, they are on course to meet the $200-billion target for 2010-11.

With imports outpacing exports last month, the Commerce Secretary, Dr Rahul Khullar, had said that trade deficit may touch an all-time high on a fiscal basis of $135 billion in this financial year.

Significantly, trade deficit in August 2010 had risen to a 23-month high of $13 billion. Trade deficit for April-August 2010 was $56.62 billion, a 40.6 per cent increase over $40.28 billion of the corresponding period last fiscal.

Trade deficit

To a question on the fast-growing trade deficit, Mr Sharma said, “We always had unfortunately an adverse trade balance because we have very high imports of petroleum and gas to India. That cost escalation is reflected in the imports and the imbalance. That situation is carefully monitored.”

“We don't control international oil and gas prices. India is one of the biggest importers of petroleum products. When the prices go up, definitely there is a scaling up of import numbers. At the same time, we have done everything possible to encourage exports to reach out to more destinations across the world. I am sure that India's trade will meet the target which we have for this year,” the Minister said.

Asked about goods exports in September 2010, he said, “I don't have the official figures. But exports are still healthy. As of now, I am very hopeful that we are on course to meet our target.” Mr Sharma had said on Friday that the Government would extend incentives to struggling sectors after the sectoral review in December.

A close look at the trade data shows that non-oil imports are rising faster than oil imports.

Non-oil imports during August 2010 were estimated at $21.88 billion, up 41.1 per cent from August 2009. Among those items of import that registered a major increase in growth were pearls and gems, fertilisers, vegetable oils, iron and steel, non-ferrous metals, chemicals, coal, gold and machinery.

On the other hand, oil imports during August were $7.79 billion, an increase of only 12.4 per cent over $6.94 billion in August 2009.

Oil imports during April-August 2010 were $40.74 billion, an increase of 31.7 per cent from $30.93 billion in the corresponding period last year. Non-oil imports during the period under review were $101.16 billion, which was 33.7 per cent higher than $75.68 billion in April-August, 2009.

According to data from the World Trade Organisation's just-released International Trade Statistics 2010 released recently, India has the world's third largest merchandise trade deficit after the US and the UK.

In the calendar year of 2009, India's trade deficit was $87 billion, against $549 billion for the US and $129 billion for the UK. However, the Commerce Ministry data on trade deficit is on a fiscal year basis. In 2004-05, India's trade deficit was just $33.7 billion.

Source : istockanalyst.com