Improvement in trade balance on sharp decline in imports: India Ratings

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India Ratings & Research (Ind-Ra) had said that the significant improvement in the trade and current account balance witnessed during FY14 is mainly due to a sharp contraction in Indian imports and a moderate increase in exports. The agency expects current account deficit in FY14 to decline to 2.2 per cent of GDP from 4.8 per cent in FY13.

Ind-Ra believes that the current trajectory of exports will improve as the incipient global recovery gathers pace in 2014.

"Although imports had been listless even in FY13, it contracted 8.1 per cent yoy in FY14 due to sluggish economic activities and a curb on gold imports. However, exports increased 4.0 per cent yoy in FY14 as against a contraction of 1.8 per cent yoy in FY13. As a result, trade deficit in FY14 shrank to USD138.6bn from USD190.3bn in FY13. While oil imports expanded 2.2 per cent yoy, non-oil imports contracted 13.3 per cent yoy in FY14 due to lacklustre industrial demand," a release states.

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