Trade deficit falls to $10.1 billion in April

Easing pressure on the country’s external sector as well as the rupee, India’s trade deficit contracted to $10.01 billion in April as compared to $10.51 billion in the previous month and $17.67 billion reported in the corresponding month of the previous year. The contraction in trade deficit was credited to high exports which increased by 5.26% to $25.63 billion in the reported month from $24.35 in April 2013 mainly on the back of healthy growth in engineering, marine and leather goods shipments. Engineering, marine and leather goods exports during April recorded growth of 21.25 %, 42.18 % and 30.42 % respectively. Furthermore, Indian imports too witnessed strong contraction at 15% to $35.72 billion in April from $42.02 billion in the same month of previous year. Contraction in domestic import was primarily driven by weak domestic demand and restrictions on gold imports that steepened the fall in non-oil imports to 21.5% y-o-y to $22.74 billion in the reported month. Gold imports last month declined by 74.13 % to $1.75 billion from $6.78 billion in April 2013 due to the stern Government’s norms like high customs duty of 10% and existing 80/20 rule under which 20% of all gold imports by importers has to be re-exported. Oil imports for the month of April also declined by 0.6 % to $12.98 billion as compared to $13.05 billion in the corresponding month last year. Trade deficit, being an important component of current account deficit (CAD), raised hopes that the improvement in CAD in the last financial year will continue in the new fiscal year. In the FY14, the CAD is likely to improve to around 2% of GDP level as against the record high at 4.8% of GDP in FY13 on the back of improved trade deficit figure.