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Aided by plunging gold and silver imports and an uptick in exports, India’s trade deficit shrunk in January as efforts to manage a weak current account deficit (the gap between inflows and outflows of foreign exchange) appear to have yielded results, latest trade data released on Tuesday showed.
Exports increased 3.8% to $26.75 billion in January as trade deficit moderated to $9.92 billion from $18.9 billion in the year-ago period.
A narrowing trade deficit has triggered expectations that the government will be able to contain CAD within less than $50 billion from the record $88 billion or 4.8% of GDP last year.
For the April-January period, exports rose 5.7% to $257.09 billion from $243.19 billion the same period of the previous year.
Imports during January were valued at $366.65 billion, a 18.07% fall over last year’s $447.54 billion.
Together, gold and silver imports declined 77% to $1.72 billion against $7.49 billion in the same month last year.
The government has raised import duty on gold to 10% and has made it mandatory to export 20% of imported gold in the form of ornaments. The Reserve Bank of India has also specified that importers will sell the metal only to jewellers or dealers supplying ornament manufacturers.
India imported 970 tonnes of gold in 2012 and this is expected to come down to less than 800 tonnes this year.
Commerce secretary Rajeev Kher said India looks on course to to achieve the export target of $325 billion during 2013-14.
Exporters, however, said that shipments weren’t rising fast enough and needed urgent policy intervention.
“The modest growth in exports is worrisome to achieve the targets for this fiscal. The data of 3.4% growth during December, 2013 and 3.79% growth in January, 2014, indicate that exporters need immediate government attention,” said M Rafeeque Ahmed, president, Federation of Indian Export Organisation.