NEW DELHI: In a clear indication that the ongoing economic slowdown is going to be protracted, foreign trade data released on Friday showed that imports, which indicate future economic activity, plunged 13.45 per cent to USD 39.58 billion in August compared to the same month last year.
While the drop in exports — by 6.05 per cent to USD 26.13 billion — was somewhat expected because of the global downturn, experts warn that the drastic fall in imports could mean the distress in the economy will last much longer than previously thought.
“When we look at economic recovery, imports are the key indicator as imports of producer goods like machinery feed future growth,” said Prof N R Bhanumurthy of the National Institute of Public Finance and Policy.
Machinery imports, which go into the makings of future factories, fell 8.8 per cent while raw materials for the industry — organic and inorganic chemicals — dropped 14.95 per cent. Coal and coke imports, too, declined 23.75 per cent.
“De-growth (decline) in machinery imports today will have serious repercussions in overall recovery tomorrow. We are seeing a fall in import of raw materials, which feed into our industries indicating the continuation of a slowdown,” said Prof Biswajit Dhar of JNU.
While the steep decline in imports has resulted in narrowing of the trade deficit to USD 13.45 billion against USD 17.92 billion in August last year, Dhar says this cannot be treated as good news.
India’s GDP grew just 5 per cent in the June quarter. Several economists have forecast India’s growth to be in the 5.5-6.75 per cent range, lower than the government’s 7 per cent forecast.