NEW DELHI (Sputnik): India’s
government said that the nation’s trade deficit widened last month amid an
increase in imports and the mounting fiscal and structural challenges facing
the country’s exporters, while international trade tensions appear to have come
at the detriment, rather than benefit, of the Indian economy.
Kristian Rouz — The
Indian economy is facing mounting challenges, posing a political risk for Prime
Minister Narendra Modi ahead of a national election, as imports rise, exports
remain low, and higher tax costs put additional pressure on smaller
Modi finds himself
under pressure for not having done enough to increase the nation’s role in
international trade over the past five years.
According to a report
from the Commerce Ministry, India’s trade deficit rose to $14.73 bln last
month, up from $13.08 in December. The nation’s imports increased due to a rise
in gold imports, while exports posted a modest expansion, contributing to the widening
For their part, India’s
small exporters — which contribute roughly 35 percent to the nation’s overall
exports — are facing rising fiscal risks after the disorderly launch of the
national sales tax back in 2017. India’s exports in textiles, engineering
products, and agricultural goods were impacted by the lack of bank financing of
private-sector exporters, as well as protraction of refunds in the goods and
“Exports by small
companies could have done much better if supported by flow of bank
credit”, Ajay Sahai of the Federation of Indian Export Organisations said.
The Commerce Ministry
said that in January goods exports rose 3.74 percent to $26.36 bln, while
imports increased 0.01 percent to $41.09 bln. Gold imports alone jumped a
massive 38.16 percent to $2.31 bln.
A separate report from
the Reserve Bank of India’s Centre for Advanced Financial Research and Learning
(CAFRAL) in Mumbai also found the government’s statistic could be
insufficiently representative of the state of affairs in the Indian economy.
Experts believe the real macro fundamentals could be worse than they appear in
“We have an
unhappy situation where markets, agencies, and foreign investors are all making
their own assumptions”, CAFRAL’s Amartya Lahiri said.
Economists say India’s
foreign trade could have been impacted by the ongoing tensions in international
trade. The nation’s trade deficit in the first 10 months of the 2018-2019
fiscal year increased to $156 bln compared to $136 bln over the same period of
the previous year.
growth is slowing down and global economies including China and South East
Asian nations are also facing contraction in manufacturing, worsening the
fragile global situation”, Ganesh Kumar Gupta of the Indian Export
Indian exports could
face additional pressure in the 2019 calendar year, and experts believe the
nation’s trade deficit could increase further.
India’s exporters also
said that the nation has not benefited from the disruptions in the US-Chinese
trade, while countries like Bangladesh and Vietnam have increased their own
exports to the US market amid the elevated friction. India has largely failed
to take over China’s share of exports to the largest international markets, and
PM Modi is facing rising criticism for the inefficient trade policies.
This as India’s exports
to the US rose 10.5 percent between last April and December, compared to
11.8-percent growth over the same period of 2017. However, imports from the US
increased a whopping 35 percent last year, hardly contributing to the
profitability of Indian trade.
Officials in New Delhi
said they are in the middle of talks with US trade representatives to increase
bilateral cooperation in aerospace and defence, as well as biopharmaceuticals
and energy sectors. This as India has faced criticism from US President Donald
Trump, who said that the nation’s tariffs are too high, while some local taxes
prevent the expansion of US companies into the Indian market.
However, Indian experts
say that deeper cooperation with the US might not necessarily benefit the
Indian economy due to its slowing exports and rising imports from the US.
However, stronger US ties could help bring foreign investment to India, albeit
possibly at the cost of a deeper trade deficit.
needs foreign capital inflows to the tune of nearly $100 billion every
year”, CAFRAL’s Lahiri said.
For its part, the
International Monetary Fund (IMF) said India’s GDP could grow 7.5-7.7 percent
in 2020-21, making it the fastest-growing economy in the world.
This outlook, however,
happens to be at odds with the Indian government’s nominal GDP growth
projection of 11 percent — yet again raising a question of how accurate India’s
official data is.