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India's Trade deficit at $20 billion in January; imports hit record high

Discussion in 'World Economy' started by tunguska, Feb 13, 2013.

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  1. tunguska

    tunguska Major SENIOR MEMBER

    Mar 10, 2012
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    NEW DELHI: India posted its second highest ever monthly trade deficit of $20 billion in January as imports surged to record highs, piling pressure on a widening current account deficit and limiting scope for the central bank to cut interest rates.

    Struggling to turn around an economy that is slowing to its lowest growth rate in a decade, the Reserve Bank of India cut interest rates by 0.25 per centage points last month, but warned that future rate cuts would depend upon declines in both the current account deficit and inflation.

    However, there was little sign of any respite on the external front for Asia's third largest economy in December as a surge in imports dwarfed a slight improvement in exports.

    Exports rose an annual 0.8 per cent to $25.59 billion in January, the first time they have risen since the start of the fiscal year in April last year, on the back of better sales of engineering goods, drugs and gems.

    But imports rose 6 per cent to $45.58 billion, according to a senior trade ministry official, their highest ever monthly total. Imports of oil, the single biggest item, rose 6.9 per cent from a year ago to $15.9 billion.

    "The oil import bill is definitely a challenge, but for a growing economy, energy needs have to be met," commerce and industry minister Anand Sharma told an industry conference in Mumbai.

    The January trade deficit was the second worst on record. The worst figure was $20.9 billion posted in October.

    Current account data for the October-December quarter will be released at the end of next month, but the deficit touched a record high in September at 5.4 per cent of GDP due to slowing exports and heavy oil and gold imports.

    New pressure on the rupee

    The Reserve Bank of India is worried that India's ability to fund its rising current account deficit is becoming increasingly stretched, and could lead to fresh pressure on the rupee.

    "The high current account deficit is unsustainable as it can't be funded for a long time with capital flows and it will get adjusted through the exchange rate," said A Prasanna, economist, ICICI Securities Primary Dealership. "The exchange rate will depreciate when the correction happens."

    The rupee struck its weakest in over a month in early January at 55.38 to the dollar, but has since recovered on capital inflows. The rupee strengthened marginally to 53.84 to the dollar after the data, as some traders had priced in an even wider trade deficit.

    Exports between April and January fell 4.9 per cent to $239.7 billion, pushing the cumulative trade deficit for the first 10 months of the fiscal year to $167.2 billion, up 8 per cent on the same period a year earlier. Sluggish demand from the United States and Europe has crimped India's exports.

    Samiran Chakraborty, an economist at Standard Chartered Bank in Mumbai, said the trade deficit's deterioration in January was a concern, as it would typically be expected to improve during the January-March quarter, but a surge in gold imports in anticipation of a recent import duty may have been a factor.

    The government did not detail imports of gold, usually the second-biggest item.

    On Monday, Reserve Bank of India governor Duvvuri Subbarao reiterated concern over financing the current account deficit with volatile capital flows. Portfolio inflows into India have been robust, with $8.34 billion so far this year after inflows of $31.41 billion in the whole of 2012.

    Subbarao projected a record high current account deficit for the 2012/13 fiscal year, ending in March. Many analysts expect the deficit to rise from 4.2 per cent of gross domestic product in 2011/12 to a record 4.5-5.0 per cent of GDP for 2012/13.

    Trade deficit at $20 billion in January; imports hit record high - The Times of India
  2. Manmohan Yadav

    Manmohan Yadav Brigadier STAR MEMBER

    Jul 1, 2011
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    Do you know India Imports Gold worth Rs.175000 Lakh Crores
    thats 35 Billion per year

    all that gold simply goes in the Bank Lockers and Cupboards of the Individuals
    no contribution to the economy

    From the Point of View of an Economist on a Macro Scale
    this is utter waste of FOREX
  3. Himanshu Pandey

    Himanshu Pandey Don't get mad, get even. STAR MEMBER

    Jul 21, 2011
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    we need to concentrate on small and easy to manufacure things which we import from china and other countries....

    even cigratte lighters are imported from china... need to support the home industries in this sector and also in engg. sector.... govt. should promote a cell phone manufacurting policy in which either you have to make phones in India to sell them in India or promoting some Indian companies to starting production of Indian cellphones.

    we need to seriously research on hydrogen fuel and investing in using it as common fuel rather then petroleum products.
    gold is something which we all love and which we all want... rather then discouraging its import we need to promote people for investing it in place of safeguarding it.

    more then all above we need a true leader and visionary group of ministers who can see and address the problem rather then fire-fighting it
  4. anuanoop0

    anuanoop0 2nd Lieutant FULL MEMBER

    Mar 5, 2012
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    oil contributes almost 30% of our imports.But we cannot stop oil imports at all...But i remember a statement by mr. manmohan singh that "India will be self reliant n oil by 2030".India ranked 19th in top 30 countries that have highest 'proven oil reserves'.If we became self reliant oil our current account deficit will be reduced

    :moil:As long as our manufacturing sector cannot catch up with global competitors we will face major set backs in economic growth.Also FDI flows are reducing.Hope the government will make an good economic policy to pick up our growth?:coffee:
  5. ricky123

    ricky123 Captain FULL MEMBER

    Oct 30, 2012
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    india's problem is not its lack of exports but its imports ..we have to cut our imports mostly oil .....gold imports is ok as there is a hugh demand for gold in india ..did u know 1/3rd of worlds gold is with indian housewives .... plus gold is a safe investment ...china is also storing gold ....if we keep dollars and later dollar collapses then we r in big trouble .... as u saw last year since usa put sanctions on iran we were not able to pay them in dollars and they dint want the entire amount in rupees .so we used gold instead ..... we need some spending cuts .. mostly in the gov sectors

    did u know that all mps get free petroll till 280 liters something and even after that it will only cost them rs27..

    just find out how much our mps pay for in the parliment canteens ..... see how many cars and bunglows are alloted to our mps .....

    just pick up a reliance electric bill and at the bottom of it u will read
    why the fk should honest citizens pay if reliance cant protect its power lines ????

    the same way all the unnecessary money which is spent on our gov employees ..honest citizens have to pay the price for it

    its like traveling in the mumbai local train even after u get a first class ticket u still need to fight for space to keep ur foot down
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