Govt says trade deficit to narrow; rupee up on export cheer

Moneycontrol Bureau

India's February exports rose 4.25 percent from a year earlier to USD 26.3 billion, while imports rose 2.6 percent to USD 41.2 billion, leaving a trade deficit of USD 14.9 billion, trade ministry officials said on Monday.

Exports between April and February fell 4 percent year-on-year to USD 265.95 billion. Oil imports for the month of February rose about 15.5 percent from the corresponding period a year ago.

Buoyed by the data, the rupee rose from its day’s lows of 54.52, currently trading at 54.39 to a dollar.

"There is greater comfort on current account deficit given the dilution in headwinds from external sector," says a senior dealer with a private bank. The risk for rupee at this stage is from RBI's hawkish guidance on monetary policy and general dollar strength against major currencies, dealer added.

Also read: Sustaining export growth in weak global economy tough: RBS

Commerce Secretary SR Rao said the deficit is lower due to a pick-up in exports, adding that the government is taking measures to help push up exports. With a view to boost exports, the government will announce incentives for exporters in the forthcoming foreign trade policy (FTP).

“Europe is performing better now. The decline has been arrested. Sectors which have large weightage, especially engineering, has started performing better and refined oil too. There is also a marginal improvement in textiles exports," commerce secretary S R Rao told reporters.

Other sectors which performed well include rice, oil meals, pharmaceutical and chemicals. Rao said the ministry is intensely engaged with stakeholders for the forthcoming FTP, expected to be announced by end of this month.

Imports rose by 2.6 per cent to USD 41.18 billion in February, leaving a trade deficit of USD 14.92 billion from USD 14.93 in February 2012. Last month trade deficit had widened to around USD 20 billion, the second highest figure ever in a month.

“We certainly expect that trade deficit to narrow as exports are picking up," Rao said. However, during the April-February period, exports declined by 4 per cent to USD 265.95 billion.

Imports during the 11-month period grew by a mere 0.25 per cent to USD 448 billion, leaving a trade deficit of USD 182.1 billion.

(With inputs from agencies)