ANALYSIS. Trade trends need to be closely monitored in the months ahead

The trade data for March, released on Friday, contain pointers to potential trouble spots that policymakers must watch out for in the months ahead.

Exports were dragged down by a sharp dip in petroleum products which is the top export item, accounting for a fifth of the total value. They were down 59.58 per cent in March with the monthly run-rate halving to $2.36 billion compared with last year. The extent of the fall matches the trend of the last few months — February had seen a decline of 54.56 per cent.

The slide in oil prices in the last nine months has eroded the value of product exports; volumes have also fallen due to the slowdown in consuming economies. They are unlikely, in the next few months, to return to levels seen a year ago. If anything, they may fall further before stabilising at lower levels.

Also, oil import in March was down by half and for 2014-15 by 16.09 per cent to $138.26 billion. But the point to note is that prices have been moving up quietly in the last few weeks. From around $51 a barrel just a month ago, benchmark Brent crude oil is now close to $64 a barrel. The prognosis for oil prices is that they will move up in the next few months though they are unlikely to return to the heady levels of $100 a barrel in the near future. It naturally follows that the import bill will rise correspondingly in the months ahead.

Gold import, next only to oil, seems to have shot up in March which is also reason for worry. Though official data are yet to come, gold imports were estimated at 125 tonnes in March, which is more than double that in the same month last year. They were much lower in February, at 55 tonnes. A large part of the 10.55 per cent rise in non-oil imports in March is probably attributable to the spike in gold imports.

The government has been taking comfort from falling oil prices while relaxing controls on gold imports. But it may have to watch the developing trends closely, given that oil prices are moving up again. The outlook for merchandise exports is also not very good, given that the European Union, India’s largest trading partner, is showing no signs of a recovery. Meanwhile, non-oil, non-gold imports could begin to rise if green shoots in the economy, which are now visible, take strong roots. These trends need close watching in the months ahead.

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