Trade deficit improves, falls sharply by 27.8%

Turnaround in exports, grows by 4.1% over minus 1.8% in 2012-13; Imports fell by 8.3% after steep slowdown during previous year

July 09, 2014 1:52 IST | India Infoline News Service

In the Financial year 2013-14 there were encouraging signs on the foreign trade front as India’s trade deficit recorded a sharp fall. The export-import deficit bridged in by 27.8%, from US$190.3 billion during 2012-13 to $137.5 billion. In Financial Year (FY) 2014-15 first quarter trade deficit declined by another 42.4%. 

The sharp fall in trade deficit was largely due to a fall in imports of gold and capital goods as non-Oil import deficit fell sharply to $35 billion from $87.2 billion during the previous FY. However, there was not much change in the POL (Petroleum, Oil and Lubricants) deficit which was hovering at around $100 billion in the last two years and constituted 36.7% of total imports during 2013-14. 


In 2013-14 India’s exports stood at $312.6 billion as against the targeted $325 billion. This represented a turnaround of 4.1% growth rate from the previous year’s negative growth of 1.8%. In the first quarter of current FY, export growth was slightly better at 5.3% in April, 2014 and for the first time in six months exports growth logged double digit growth at 12.4% in May, 2014. As regards sectoral performance, many sectors which recorded negative growth rate in 2012-13, have moved to the positive zone, barring gems and jewellery and electronic goods. Many labour-intensive export sectors like textiles, leather, handicrafts and carpets have performed relatively better. While textiles exports grew by 14.6 percent, the exports in leather and leather manufacturers sector recorded a 16.7 percent jump, with the European Union and USA being the major markets. The share of India’s textile exports to China also rose from around 2 percent in 2010-11 to 5 percent in 2012-13 and further to 7 percent in 2013-14. 

The Services sector including travel, transportation and insurance improved slightly in 2013-14 with a 4 percent growth rate, compared to 2.4 percent during the previous year. 


The sharp decline in trade deficit is largely attributable to a fall in imports. Imports dropped by 8.3%, after steep slowdown during the previous FY 2012-13. Import growth had decelerated sharply from 32.3 percent in 2011-12 to 0.3 percent in 2012-13 and clocking a negative (-) 8.3 percent in 2013-14. The trend continued during April-May, 2014 as imports fell by 13.2%. On the back of several measures taken by the government, the value of gold and silver imports fell by 40.1 percent to $33.4 billion in 2013-14, with the import of yellow metal declining from 1,037 tonnes in 2012-13 to 664 tonnes. 


The pick-up in India’s exports in April-May 2014, after five months of low/negative growth, though a positive sign, is partly due to the low base. The quarterly and monthly export and import growth performance of the world and major trading countries is also not very encouraging. Thus world trade and India’s exports are still fragile, the recent good performance notwithstanding. There is also the downside risk of external shocks like the latest increase in oil prices owing to the Iraq crisis.

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