Comment | Trade deficit improves as imports at one-and-a-half year low

India’s trade deficit, or the excess of imports over exports, fell to a mere $9.6 billion in February 2019, the lowest since September 2017. But the improvement has not been due to higher exports. Instead, imports have fallen sharply.

India’s export engine continues to sputter. Just how miserable the performance has been can be seen from the fact that exports in February 2019 were lower than what they were in May 2014. Non-petroleum products exports in February 2019 were lower than where they were in March 2014.

The less said about India’s export growth in the last five years, the better.

The improvement in the trade deficit in February has come about solely on the basis of lower imports. Imports were at their lowest level since August 2017. Crude oil imports were at the lowest in the last fifteen months, while non-oil imports were at the lowest level in 19 months.

There is one intriguing fact----imports of electronic items fell sharply from a month ago. It’s possible that this could signal an improvement in the trade deficit with China, as imports of electronic items such as mobile phones are mainly from China. But this improvement will have to be sustained.

Unfortunately, a contraction in imports, particularly non-oil imports, is also usually a signal of a slowing economy, a conclusion supported by the GDP data.