- POSTED: 09 Oct 2013 20:15
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India's trade gap slid to a 30-month low last month, data showed on Wednesday, boosting government hopes of narrowing a massive current account deficit and easing pressure on the rupee.
NEW DELHI: India's trade gap slid to a 30-month low last month, data showed on Wednesday, boosting government hopes of narrowing a massive current account deficit and easing pressure on the rupee.
The trade deficit slimmed to $6.76 billion in September from $10.9 billion the previous month, the lowest since March 2011, the commerce ministry reported.
The gap was significantly below market forecasts and marked a rare piece of good economic news for the Congress-led government which has been battling to spur a sharply slowing economy and put a floor under a falling currency.
"The main reason for the decline in imports was a dip in imports of gold and oil," Commerce Secretary S R Rao said in New Delhi.
Rao said the government has taken "conscious" measures to curb imports of non-essential items, such as raising import taxes on precious metals like gold that are "working out".
India, the world's largest buyer of gold, has made strenuous efforts to constrain imports of bullion to lower its current account deficit -- the widest measure of trade -- that hit a record $88 billion in the last financial year.
The high deficit has fanned worries about a balance of payments crunch and put pressure on the rupee, which lost nearly a fifth of its value against the dollar in the space of four months before retracing some of its losses in September.
Exports climbed 11.2 percent to $27.68 billion last month, helped by greater demand for made-in-India products in developed nations and the weaker rupee which made the nation's goods more competitive.
Imports tumbled 18 percent year-on-year in September 34.4 billion, helped by lower gold purchases, the second-largest item in India's import list, and softer demand due to a weak economy.
Imports of gold and silver plunged over 80 percent to 800 million in September from $4.6 billion a year earlier, while oil imports slipped by six percent to $13.19 billion.
Finance Minister P Chidambaram said last weekend he believed he would be able to reduce the deficit for the financial year to March 2014 to below $70 billion.
Analysts forecast further improvement in the trade balance during the course of the year.
The measures taken by the government "should translate into a smaller current account shortfall through the third and fourth quarters", said Glenn Levine, economist at Moody's Analytics.
But economists were sceptical whether last month's sharp improvement in the trade gap could be maintained in the near term, given the US government shutdown and a revival in gold imports due to religious festive season demand.