Aside crude, sharp rise in non-oil imports too contributing to trade imbalance:

It is not only crude oil that is exerting pressure on India’s import bill and consequently on the current account deficit and the rupee. A host of other non-oil items like coal, electronics, chemicals, leather & leather products, and fruits & vegetables are witnessing rising imports and becoming a drag on the country’s overall balance of trade situation, an ASSOCHAM analysis has noted.

“While there is no alternative to crude oil and gold imports, domestic supply constraints have led to an increase in imports by well over the double digit in as many as 22 (other than crude and gold) out of 30 top import items,” the chamber noted from the latest July data.

“It is given that crude oil and gold and to an extent, essential chemicals, and select electronic items do not have any domestic alternative and therefore, their imports are unavoidable. But close to 60% rise in imports of fruits and vegetables from US$98.67-mn in July 2017 to US$157.47-mn in July, 2018 can surely be reduced, if not eliminated by improving domestic productivity and quality.”

The same is true about coal, coke and briquettes, which have witnessed a run-away upward movement in imports for the month under review, from US$1.54-bn to US$2.05-bn. Likewise, imports of leather & leather products saw a rise of over 22% from US$79.66-mn to US$97.54-mn, while electrical and non-electrical machinery witnessed a 30.59% jump in imports from US$2.4-bn to US$3.15-bn.

The import pressure on account of crude oil is evident from the fact that India has seen a rise of 57% rise in the import bill in July 2018 to US$12.34-bn from US$7.84-bn in the comparable month of the previous year. A fair bit of pressure is also seen with regard to import of iron and steel (up 20%) and non-ferrous metals (up 29%).

No wonder the trade balance in July 2018 worsened to US$18-bn from US$11.45-bn a year ago. “Surely, a well – coordinated effort is needed, which can reduce India’s import bill, while continuous measures are required to ramp up exports. Removing domestic supply constraints should not be construed as import substitution in the traditional sense of the word. These imports can create both cause and effect on the sliding rupee,” the industry association said. “A close eye is needed on the imports situation, especially of non-oil items and domestic production needs to be ramped up,” it added.