Trade deficit shrinks as exports dip marginally and imports decline 14%.

NEW DELHI: India's merchandise exports in August came in at almost same level as last year with nearly half the exports sectors reporting growth, raising hope that the worst may be behind.

A sharp decline in imports led by a fall in gold buys helped keep trade deficit low.

Exports in August were pegged at $21.51 billion compared to $21.58 billion in the year ago period while imports declined 14 per cent to $29.1 billion from $33.9 billion, data released by the commerce and industry ministry showed.

Trade deficit shrank to $7.67 billion in August from $12.4 billion in May but almost unchanged from levels in July. Gold imports declined almost 77.4 per cent to $1.1 billion last month.

"The 14 sectors that have shown growth in exports are labour intensive and this is a good sign. From October onwards, we can expect growth in exports with an expectation to reach $280 billion for the full year," said Ajay Sahai, CEO, Federation of Indian Export Organizations (FIEO).

RBI data showed services exports of $12.7 billion and imports of $7.4 billion in July. Services data is available with a lag.

Aditi Nayar, senior economist at ICRA, said moderation in the services trade surplus in July for the third consecutive month is a source of concern.

"Overall the trade balance has improved," commerce department said in an official release.

Non-petroleum imports contracted 15.6 per cent to $22.4 billion while oil imports shrank 8.47 per cent to $6.7 billion. Non-oil, non-gold imports, a measure of domestic demand and strength of economy, fell 1.8 per cent to $21.7 billion.

FIEO reiterated that Rupee depreciation is one of the important factors in pushing exports but not the sole factor. Other issues like high logistics cost, high cost of credit and transaction costs also needs to be addressed besides, little support from global economy.

Source : economictimes.indiatimes.com