Trade deficit at $10.4 bn on export, import rise

NEW DELHI: Trade numbers for December released on Friday provide more cheer for the economy a day after November industrial growth numbers surprised on the upside, suggesting economy may not have been hit as hard by demonetisation as feared.

Exports were up fourth month running, rising 5.7% in December to $23.8 billion, the highest sinch March 2015, commerce and industry ministry data showed.18 of the 30 export sectors registered growth. Exports had declined 14.75% in December 2015, implying a low base effect to the growth.

Imports were up 0.46% to $34.25 billion leaving a trade deficit of $10.4 billion. Non-oil, non-gold imports, seen as a measure of domestic demand and strength of the economy, rose 4.4%.

Experts said demonetisation impact is likely lower since most export orders for Christmas and New Year are placed much in advance. Problems at the supply and procurement front could get reflected in the January and February exports data.

“It is difficult to say if demonetisation has had any impact or not on exports because there is a high base effect and a lot of Christmas related exports take place in December,” said Sunil Kumar Sinha, principal economist at India Ratings & Research.

Gold imports fell 48% after the government demonetised high denomination currency in November, helping improve trade deficit. China’s exports shrank 6.1% in December and dived 7.7% in 2016.

“Even as the pickup in growth of merchandise exports in December 2016 is encouraging, the bulk of the decline in the trade deficit can be attributed to lower gold imports,” said Aditi Nayar, principal economist at ratings firm ICRA.

Gems and jewellery, pharma and engineering goods posted strong growth. Higher imports are of coal, electrical & non-electrical machinery and chemicals, suggesting a pickup in industrial demand and not consumer demand. Merchandise exports in April-December grew 0.75%. Oil imports were 14.61% higher yearon-year at $7.645 billion.

Services trade surplus narrowed to a fivemonth low of 20.8%, as imports jumped 46.4% in November 2016. “It appears our exports have gained positive momentum and we are optimistic this would sustain. This is noteworthy as other key countries like China, USA and EU have been facing negative export growth,” CII said in a statement.