I’ve been looking at the monthly foreign trade numbers for quite some time now and there are three things that are more or less consistent every month. These have become a consistent feature of India’s numbers, and it’s a good idea to be aware of them.
The first thing is the huge rise year over year. Numbers are declared for every month, and usually they represent a huge jump over the same month in the previous year. In July 2011 – exports grew by 81.79% and imports grew by 51.52%.
If you look at the growth figures for the 4 months from April to July then the numbers are slightly lower (but still quite high) at an export growth of 53.98% and import growth of 40%.
This brings me to the second point – trade deficit.
Exports may have been growing faster than imports but who knows when India will run a trade surplus?
While a lot of our Asian neighbors have grown using the export route – I couldn’t find any data about an Indian trade surplus – not at least in this decade.
I think it’s very interesting that the huge diaspora abroad remits money, and in some ways make up for the lack of exports, but surely, we want to run a trade surplus at some point?
The third thing is how much of the imports are oil imports. This is no surprise, and if you want growth you need oil – there is no denying that, but the huge oil bill makes you wonder if fast enough progress is being made in trying to produce oil domestically.
According to this DNA article – India’s domestic oil production is 715,000 barrels per day, whereas its consumption is 2.6 million barrels per day. That means about 27.5% of the oil consumed is produced domestically.
That article was about Cairn developing their new finds in Rajasthan and that’s expected to raise production there to 350,000 barrels per day from the current 125,000 barrels per day.
So there are ways to increase the domestic oil production, and that not only helps reducing the trade deficit but reduce the oil bill and bring down inflation as well.
I feel that it’s inevitable that domestic oil production increases with time, but what’s not so certain is that it keeps pace with the growth in demand. And it’s not clear what will spur the next big push in exports; which areas can India focus on as far as the next big export push is concerned. It seems that it should be in manufacturing, but then which niche in manufacturing?