Government unfazed by high import bills and trade deficit spikes

India's rising import bills attributed to faster growth, precious metals, and electronics use for exports, not a concern.

The Centre is non-plussed about the recent spate of record-high import bills and is not actively mulling any import compression measures, top trade officials asserted, attributing the rising import tallies to India’s relatively faster growth vis-à-vis the rest of the world, and the use of some incoming goods like precious metals and electronics as inputs for exported items.

Over the past three months, India’s goods imports have scaled fresh highs twice, hitting an all-time high of $64.34 billion in August, which was subsequently eclipsed by October’s tally of $66.34 billion. While August clocked the second highest monthly merchandise trade deficit, the gap was $27.14 billion in October, the third highest on record, aided by a 28-month high 17.5% uptick in exports.

In August, record gold imports had fuelled the import bill, while October’s imports were driven by both gold and oil imports, that had risen 62% and 46.4%, respectively from September’s levels.

Between April and October, goods imports are up 5.8% at $416.9 billion, while outbound shipments grew by a more modest 3.2% to $252.2 billion, lifting the deficit to $164.6 billion from just under $150 billion last year.

“We need not be unnecessarily worried about rising imports or take a mercantilist view about trade that a few countries had once taken against free trade, thinking it is always better to export more and import less and keep a positive trade balance,” a top Commerce Ministry official said in response to a query from The Hindu on the import bill spikes.

“If everybody starts saying ‘We will export more and import less’, then, trade will not happen. Some countries have to export more and some have to import more. What is material is the nature of those imports,” he noted.

For exporting finished goods in sectors like electronics, India may require certain imports to build up the value chain. “Once we develop the manufacturing capabilities and ecosystem, the story changes as it did in automobiles,” the official pointed out. India, he emphasised, should be more focused on raising exports which would also enable higher imports.