India's Trade Deficit

India's Trade Deficit

India's Trade Deficit hits a new low.   The country's trade deficit maintained its double-digit rate of growth, while imports shrunk.  The "Times of India" reports that the provided data was encouraging especially for policy makers looking to cap the current account deficit.  The Commerce Department showed that the trade deficit had narrowed to 6.8 billion in September, India's lowest since that of March 2011 when it was estimated to be around 3.8 billion.  India's trade deficit is at the lowest level in 30 month's. Gold and silver imports plummeted 82% to 800 million in September, easing a major concern since prices of gold imports were to blame for the widening of the current account deficit that triggered the currency slide against the dollar.  The burgeoning trade deficit had resulted in the current account deficit hitting a record high of 5% of the gross domestic product in 2013.

India's Trade Deficit and Relief

The news is a huge relief to India's policymakers as the data released by the commerce department suggests that trade deficit had narrowed to $6.8 billion in September, the lowest since March, 2011, when it was estimated at $3.8 billion.  Since that time the monthly trade deficit has never been in single digit. Likewise the country's oil imports also decreased some 6% just topping off at a little over $13 billion.  The result of the decrease in these two major commodities was a decline in imports.  From 18% to $34 billion in September, 2013.   Commerce secretary S R Rao is quoted as saying. "The government has taken steps to curtail imports of non-essential commodities, particularly precious stones. That is the singular reason for the decline in trade deficit." A lower trade deficit has a positive impact on the rupee, which had depreciated by over 20% to a record low of 68.75 to a dollar in August end.  "I am confident that import-containment measures put in place for non-essential imports are playing out extremely well and we need to continue this so that our rupee becomes stronger," said Rao.

India's Trade Deficit and Key Markets

A slowdown in India's key markets such as the United States of America and the European Union had hurt exports.  The plan is to diversify other markets in the African continent, South East Asia, and in Latin America.  Which has helped reverse the trend. Experts say the trend has to sustain in the months ahead to help macroeconomic managers breathe easy after months of turbulence. Exports increased for the third straight month in a row; ranging from garments to textiles, pharmaceuticals to diamond jewelry.   Textile exports are estimated to have increased 15% in September.  The widening trade deficit had resulted in the current account deficit hitting a record high of 4.8% of the gross domestic production in 2012-13, prompting the government to announce a string of tough measures.

CARE Rating

CARE Ratings said in a statement, "while there will be pressure from gold imports during the festival season.  The deficit can be lower than that of 2012-13 by $10-20 billion." "India's current account deficit in the first quarter of 2013-14 was $21.8 billion (4.9% of GDP). An over $20 billion reduction in merchandise trade deficit in the second quarter as compared to the first.  This suggests significant improvement in the current account deficit for the second quarter. Better-than-expected export growth.  If sustained, creates a downside to our forecast for CAD at 3.9% of the GDP for 2013-14," added Crisil. http://www.ndtv.com/topic/trade-deficit/news http://timesofindia.indiatimes.com/business/india-business/Trade-deficit-at-30-month-low-as-gold-silver-oil-imports-fall/articleshow/23841875.cms