India's trade deficit at $17.42 billion in Jan; exports jump 25%

India's trade deficit widened to $17.42 billion in January 2022 as imports grew 23.5% year-on-year to $51.93 billion, according to data released by the Ministry of Commerce and Industry.

The country’s merchandise exports increased 25.3% year-on-year last month to $34.5 billion, aided by healthy growth in sectors such as engineering goods, petroleum products, chemicals, and gems & jewellery among others.

Exports of engineering goods soared 24.1% year-on-year to $9.2 billion. Petroleum product exports stood at $4.1 billion, 95.2% higher than a year earlier. Gems and jewellery exports were at $3.2 billion, 13.6% higher than the corresponding period last year. Electronic goods exports rose 15.4% to $1.36 billion during the month.

Meanwhile, exports of commodities such as iron ore, oil seeds, tea, spices and drugs fell in January. Drugs and pharmaceutical exports fell 1.2% on an annual basis to $2 billion in January.

Non-petroleum and non-gems & jewellery exports rose 20.1% year-on-year to $27.1 billion whereas non-petroleum, non-gems & jewellery imports rose 31.3% year-on-year to $34.6 billion.

Cumulatively, exports jumped by 46.73% to $335.88 billion during April 2021-January 2022, from $228.92 billion in the corresponding period a year ago. Imports during the April-January period increased by 62.65% to $495.75 billion. Trade deficit stood at $159.87 billion during the ten-month period as against $75.87 billion in the corresponding period a year ago.

The government is planning a gradual phase out of concessional tariff rates offered for capital goods and project imports, Fortune India reported earlier this month. The Union Budget 2022 proposed a 7.5% tariff on all such products and services.

Explaining the rationale behind the withdrawal of concessional rates, finance minister Nirmala Sitharaman had said that several duty exemptions, even extending to over three decades in some cases, granted to capital goods for various sectors like power, fertiliser, textiles, leather, footwear, and food processing have hindered the growth of the domestic capital goods sector. Similarly, project import duty concessions have also deprived the local producers of a level playing field in areas like coal mining projects, power generation, transmission or distribution projects, railway and metro projects, she had said.

The Budget also proposed gradual phasing out of customs exemptions on over 350 items. These include exemption on certain agricultural produce, chemicals, fabrics, medical devices and drugs and medicines for which sufficient domestic capacity exists.

To incentivise exports, the Union Budget proposed duty exemptions on items such as embellishment, trimming, fasteners, buttons, zipper, lining material, specified leather, furniture fittings and packaging boxes that may be needed by bonafide exporters of handicrafts, textiles and leather garments, leather footwear and other goods.