Electronics import duty working in India’s favour! Dec trade deficit falls to 10-month low, thanks to this

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India’s trade deficit in December 2018 falling to a 10-month low, thanks to a contraction in the import of electronic goods.

The government levy of import duty on electronic items seems to be working, with India’s trade deficit in December 2018 falling to a 10-month low, thanks to a contraction in the import of electronic goods. A decline in import of electronic goods indicates the “positive impact of the high import duty imposed by the government”, research and brokerage firm Anand Rathi said in a note on Thursday.

Import of electronics — India’s second highest value import item — shrank 5% in December, helping bring overall import bill down by 2.4% on-year in the month. This, in turn, coupled by an uptick of 0.4% in exports, led to India’s trade deficit in December falling to a 10-month low of $13 billion. In November 2018, India’s trade deficit was at $17 billion.

The narrowing trade deficit was also mainly due to a fall in import of crude oil, whose share in India’s total imports fell from 32% in October 2018 to 26% in December 2018. Crude oil is India’s highest value import item.

The report said that gold imports also contracted from 93% growth in August 2018 to a 16% decline on November 18 and 24% in December 18. Also, non-gold, non-oil imports saw a downward trend in November 2018. This, accompanied by a fall in oil imports, led to a consolidated import decline in the month.

These items constitute 84% of India’s imports

Besides crude oil, electronics and gold, precious stones, coal/ coke, transport items, organic chemicals, iron and steel, and non-ferrous items constitute 84% of India’s import items.

10 items that constitute 88% of Indian export

India’s exports have risen on a year on year basis in four items — gems & jewellery export rose by 3%; drugs & pharma by 19%; chemicals and engineering goods by 35% and 15% respectively. These four items constitute 52% of overall exports. Engineering goods export was also at the highest in December 18 followed by petroleum products. Ready-made garments, cotton yarn, electronic goods, rice, and plastic are among the 10 most exported Indian products.

What’s in the future?

India’s trade deficit will depend on the international oil prices in future which might see an upward trend considering the production cut decided by OPEC, Anand Rathi research note said. However, US production of shale oil might counter the oil price bringing otherwise higher oil price in check. This means that there will be a consolidated slight increase in oil price, the note said.


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