Having hit a 30-month low of $4.1 billion, imports are back with a bang. Imports for May 2019 have been recorded at a little over $5 billion – a 10-month high and a first under this government. The 11MFY19 imports are still down by 8 percent year-on-year, a respite in current times. That said, the earlier softening of imports had raised hopes of a double digit year-on-year decline for the full year, which still may happen, but appears more difficult than a month ago.
Detailed numbers are not out yet, but it appears that the energy bill would have contributed a great deal to the 10-month high import number. Not only have the prices of crude increased in the international market over the same period last year, the imported component of the power mix, particularly LNG and coal has also increased significantly – which was always pointed out as a major concern when the power plants were being added left, right and centre.
It will be interesting to see if import in the other categories, particularly food has remained subdued. The recent budget appears tough on a lot of non essential import categories, and could put a lid going forward, however, the elasticity of demand is yet to be asserted in most cases. Another round of power plants installation is also just around the corner, and the rise in imported machinery could also be one of the factors for May import bill. Be that as it may, the government surely did not see that coming after massive rounds of currency depreciation.
What the government also did not see coming was perhaps the continuing refusal of exports to rise a great deal. Exports in May 2019 were again flat year-on-year at $2.1 billion, and that for 11MFY19 were also flat at $21 billion. The target for $25 billion for the full year can now surely go for a walk.
Silver linings would still be there insofar as exports go, but only just. The volumetric growth in textile has been healthy of late, as value added sector, particularly readymade garments had shown double digit growth in terms of volume. But the intense competition in the market means the unit price also went down simultaneously, coinciding with a dip in international demand of textile.
The government has continued with the subsidized gas and power price for the textile sector, and it is time for them to work on expansion, to turn the opportunity into higher exports. Without enhanced capacity, the current pace of volumetric growth will only mean as much as it has in the past few months.
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