New Delhi: India's exports grew 11.15 percent in September and imports declined 18.1 percent amid a sharp fall in inward shipments of gold and silver, taking the trade deficit to the lowest level in 30 months. The narrowing trade deficit have raised hopes for a significant reduction in the country's gaping current account deficit, which helped send the rupee to record lows in recent months.
Exports last month climbed to USD 27.68 billion, while imports stood at USD 34.4 billion, narrowing the trade gap to USD 6.76 billion.
"The trade deficit during the month was the lowest since March 2011. The main reason for decline in imports was a dip in imports of gold and oil," Commerce Secretary SR Rao told reporters here.
In the last fiscal year India posted a whopping USD 88 billion deficit on the current account, the third largest in the world, raising fears of a balance of payments crisis. The rupee crashed as much as 20 percent between May and August.

The currency has since recovered slightly and Finance Minister P. Chidambaram is confident the current account deficit will narrow to under USD 70 billion for the fiscal year to March 2014.

Exports jumped an annual 11.15 percent in September thanks to stronger demand from Western nations and increased competitiveness thanks to the weaker rupee. The currency weakness, along with measures to reduce gold buying, helped tame imports, which fell 18.1 percent in the month.

New Delhi has taken a slew of steps including fiscal incentives for its exporters to improve the deficit. It has also raised import duty on gold shipments to a record 10 percent, and made airline passengers pay duty on imports of flat-screen televisions.

The import bill on gold and silver shipments, one of the biggest items after petroleum and crude products in the country's import basket, moderated to USD 800 million in September.


However, economists warned that trade data in the coming months could be slightly less rosy because of an expected surge in demand for jewelry as India enters its peak festive season later this month.

"The September data has come as a big positive surprise. However, we do not expect such a trend to continue given that seasonally the ongoing quarter tends to witness a higher trade deficit," said Upasna Bhardwaj, an economist at ING Vysya Bank in Mumbai.

The Indian rupee, shares, and benchmark bonds gained after Wednesday's data.

The rupee strengthened to 61.9650 per dollar at 0625 GMT from around 62.10 before the data, though it remains down about 11 percent so far this year.

The current account deficit (CAD) for the three months through June was USD 21.8 billion, or 4.9 percent of gross domestic product, driven by sluggish exports and high gold imports in April and May before the government hiked tariffs on the metal.

Saugata Bhattacharya, chief economist at Axis Bank in Mumbai predicted that deficit could narrow or even become a surplus in the September quarter, before widening again during the festive season.

"But overall, we still may end up with an encouraging current account deficit number of USD 50-USD 60 billion for the full year which may give the RBI some comfort to cut the MSF (marginal standing facility) rate further. The RBI may have been led by the better-than-expected trade deficit number to cut the MSF rate this week."

India's Central Bank cut an overnight interest rate on Monday by 50 basis points to increase market liquidity. The bank had raised the interest rate in July in a bid to shore up the rupee.


Latest News  from Business News Desk