Non-oil trade deficit to be much lower in FY'14: Assocham

Posted By: Religare
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The country's non-oil trade deficit in the current financial year is likely to be much lower than USD 81.8 billion witnessed in the fiscal 2012-13, an expected development that would reduce considerable pressure on the country's overall current account balance, an ASSOCHAM study has indicated.

Instead, the non-oil trade deficit may range between USD 65-72 billion in the current financial year.

After keeping the last year's pace in April-May, the monthly non-oil trade deficit has started coming down drastically from June onward and the trend is set to stay such in the coming months. While in the first quarter, the non-oil gap was about USD 24 billion, it is seen at slowing down in the subsequent quarters ending the year between USD 65-72 billion for the fiscal 2013-14.

"The economic slowdown in the domestic market is also reflecting on the non-oil imports. On the other hand, oil imports may continue to increase because of upward pressure on crude prices. On the other hand, the exports of petro-products may not see significant rise as the installed refining capacity would remain more or less the same. As a result, the oil trade deficit may exert pressure again and may exceed the last year's level of USD 109 billion, "the ASSOCHAM study noted.

Commenting on the trade scenario, ASSOCHAM President Rana Kapoor said, "While the total exports in July and August have shown significant recovery courtesy a sharp correction in rupee, an action plan is needed to ensure that the overall shipments exceed the double digit expansion while imports stay muted. This is imperative in view of the bigger issue of current account deficit which has been troubling the macro-picture of the Indian economy, making it more vulnerable than other emerging markets which do not such the CAD hang-over".

"Crude oil and petroleum products account for a major share of India's external trade - as much as 29-30 per cent. However, the share of crude oil in the country's total import bill is much higher. Of the USD 491 billion imports, the oil imports aggregated USD 169 billion", adds the ASSOCHAM study.

Similarly, in the export basket of USD 300 billion the petro products topped the table with shipments from refinery amounting to USD 60.29 billion. The trend is expected to remain so in the current fiscal as well, the study indicated.

Dion Global Solutions Ltd.

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