External sector worsens during the first quarter with export decline and import rise

The first quarter data on current account of the country published by the RBI shows that the trade situation is far from improving. Current account deficit which shows the sum of goods and service trade indicate that during April-June 2013, current account deficit widened to 4.9 % of the GDP compared to 3.6 % during the last year (first quarter).

A notable element of current account deterioration is the decline in exports accompanied by 4.7 percent increase in imports.

The RBI data also highlighted that capital inflows improved to $21 billion compared to 16 billion during the previous year.

The non-improving trade data is rising call for the government and the RBI to launch some medium term import restriction measures as well as stimulating exports.  On the gold import front, import duty is already high and hence the scope for raisin it further is limited.

This means that the government should bring targeted curbs on luxurious imports. On the export front it is expected that the just launched export promotion measures including restructuring of the duty draw back scheme will find their positive results in the coming months. 

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