Feb 2, 2000|
Trade deficit stagnant despite surge in oil imports
India's export growth slackened considerably in December 1999 as compared to growth rates of over 20% and 30% logged during October and November respectively. Oil imports surged 58% to touch US$ 7 bn during April – December 1999.
The surge in oil imports has failed to reflect on the trade deficit, which logged in only a marginal rise. This could be attributed to the sluggish growth in non-oil imports and a faster rise in exports. Also the effect of the rise in crude oil prices has been marginalised in view of the surge in domestic refining capacity. This has led to a sharp reduction in the imports of finished petroleum products. The rise in crude imports has only partially compensated for this. However, with international oil prices now nudging US$ 30 per bbl there could as yet be a surge in the value of oil imports.
The sluggish rise in non-oil imports does not augur well for the economy as it implies that investment activity is yet to pick up. This has created concerns regarding the sustainability of the economic recovery process. However, as and when investment activity does pick up, non-oil imports will almost surely jump.
Exports have performed well especially during the latter half of the year. With the global economy gaining steam, growth can only be expected to rise further. However, concerns regarding competitiveness of Indian exports (some segments) in terms of quality and pricing remains.
India's trade balance has been more or less stagnant over last year. This, however, is no cause for celebration in view of the slack in the economy and the sharp rise in capital account inflows.
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