Economics Prelims cum Mains

Exports sluggish, trade deficit widens to 6-month high in May

In News:
  • Wholesale inflation declined to 22-month low of 2.45% in May 2019 from 3.1% in April 2019.
  • The country’s exports grew nearly 4% to $30 billion in May, while imports rose 4.3% to $45.3 billion and the trade deficit widened to a six-month high.
News Summary:
Trade data:
Increasing trade deficit:
  • Data released by the commerce department showed the trade deficit (the difference between exports and imports) rose to $15.4 billion in May, compared to $14.2 billion in the year-ago period.
  • This is the widest monthly trade deficit since November 2018.
Data for some important sectors:
  • Imports:
    • Gold imports shot up by 37.4% during the month.
    • Oil imports in May were $12.4 billion, 8.2% higher as compared to May 2018.
    • Nonoil imports in May were estimated at $32.9 billion, up 2.9% as compared to May 2018.
  • Exports:
    • Exports grew nearly 4% to $30 billion in May, while imports rose 4.3% to $45.3 billion.
    • The major sectors that showed positive growth included electronic goods (51%), organic & inorganic chemicals (20.6%), ready-made garments (14.2%), drugs & pharmaceuticals (10.9%) and engineering goods (4.4%).
Concerns on trade:
  • Rising crude oil prices, amid sanctions on Iranian oil imports, could further increase imports and put pressure on India’s current account deficit.
  • The escalating trade war between the US and China, and rising protectionism have cast a shadow on India’s prospects for higher exports.
  • MSME sectors are still facing the problem of liquidity.
Way ahead on Trade:
  • Exporters said the government will need to act urgently to reverse the trend, and are looking forward to the budget for any relief.
  • Government needs to look at issues like access to credit, cost of credit especially for merchant exporters and interest subsidy support to all agri exports.
  • The Union Commerce and Industry Minister has laid out agenda to revamp commerce department, and is preparing a strategy for a more focused approach to boost exports.
  • The commerce ministry is contemplating an export promotion scheme, along with a production-based support scheme, to boost Make In India as part of its 100-day action plan.
Data on Wholesale Inflation
  • The Wholesale Price Index (WPI)-based inflation, base year 2011-12, declined to 22-month low of 2.45% in May 2019.
  • The core inflation (manufactured products excluding foods products) fell to 1.2% in May 2019, attributed to slowdown in demand.
  • The inflation declined for primary articles, while the inflation for fuel and power group and manufactured products also dipped contributing to the fall in overall WPI inflation in May 2019.
  • Food inflation, however, remained high at 7% in May, with cereals including jowar, bajra, maize and pulses witnessing double-digit inflation for the fourth consecutive month. Vegetable and onion prices increased by 33.2% and 15.9%, respectively, compared with May last year.

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