India’s February Trade Deficit At $12 Billion

India’s trade deficit widened in February over the same month last year but narrowed from an over four-year high last month, as export growth gathered pace, and imports moderated.

Trade deficit, the gap between exports and imports, widened 36.36 percent from a year ago at $12 billion, according to data released by the commerce ministry today. The deficit stood at $16.29 billion last month, the widest since May 2013.

India’s exports rose 4.5 percent year-on-year to $25.8 billion in February, while imports grew 10.4 percent to $37.8 billion in the same period, commerce secretary Rita A. Teaotia said at a press briefing today. The government is looking at a 6.5 percent export growth for the year, she added.

Growth was led by increasing outbound shipments of petroleum products, and organic, inorganic chemicals. Exports of gems and jewellery, which is typically the second major contributor to the bill, declined 5.14 percent, year-on-year, data showed. Engineering goods’ exports saw a marginal decline last month too. Export growth was also aided by a 2.5 percent depreciation in the Indian rupee as against the U.S. dollar.

Export Highlights

• Gems and jewellery exports fell 5.14 percent to $3.81 billion.
• Export of engineering goods declined 1.88 percent over last year to $6.54 billion.
• Export of organic and inorganic chemicals rose 30.41 percent to $1.66 billion.
• Outbound shipments of petroleum products went up 27.44 percent to $3.23 billion in February.
• Textile exports dropped 10.25 percent to $1.44 billion.
• Drugs and pharmaceuticals exports climbed 13.9 percent to $1.4 billion.

The data was a mix of good and bad news for Aditi Nayar, Chief Economist at ICRA. “While the deficit was a pullback from the alarmingly high number seen in January, it remains considerably higher from the year-ago period,” Nayar told BloombergQuint in a phone interview.

She said that the trend of higher year-on-year deficit number is likely to continue in the fourth quarter as well. ICRA estimated export growth at 8-9 percent for the year, while the current account deficit estimates stand at 2 percent of GDP for both FY18 and FY19.

The World Bank, in a prior report, said that while India’s openness to trade has increased significantly in the long-run, there were signs of slowdown in the medium-term. The Reserve Bank of India, in its latest monetary policy review, had said that export growth is expected to improve.

On the import front, shipments of crude oil, coal, pearls and precious stones inflated the bill. Gold imports declined for the second straight month, while machinery imports grew. Brent crude oil prices fell 4.74 percent, and prices of the yellow metal too declined 1.58 percent last month. The two commodities contribute nearly a third to the country’s imports.

Import Highlights

• Gold imports declined 16.9 percent year-on-year to $2.8 billion.
• Petroleum and crude imports increased 32.05 percent to $10.2 billion from last year.
• Import of pearls, precious and semi-precious stones jumped 15.86 percent to $2.6 billion.
• Organic and inorganic chemical imports went up 23.9 percent $1.75 billion.
• Import of coal, coke and briquettes jumped 17.7 percent to $1.9 billion.
• Imports of machinery, both electrical and non-electrical, rose 23.04 percent to $2.8 billion.
• Inbound shipments of transport equipment fell 49 percent to $1.26 billion.