India likely to witness record trade deficit in 2012-13

Without a dramatic turnaround in India’s export fortunes in the fourth quarter of 2012-13, India is likely to witness a record trade deficit for the fiscal. According to RBI data, India’s balance of trade remains tipped in favour of its international trading partners, with imports outstripping exports by almost Rs 8.3 lakh crore during the April-December, 2012.

In the previous year, the full-year trade deficit amounted to a little less than Rs 8.9 lakh crore. Of particular concern is that the improvement in export earnings during the first nine months was not commensurate with the sharp rise in the country’s import bill in April-December, 2012.

While exports grew by 8.1 per cent in the first nine months of the financial year over the same period the previous year, imports shot up at nearly double the pace (15.7 per cent), resulting in the trade deficit for the period swelling by 11.3 per cent.

At today’s exchange rate, the trade deficit amounts to $153.1 billion, more than half of India’s foreign exchange reserves of $294.9 billion as of end-October, 2012.

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