Not all doom and gloom – there is a silver lining in India's Exim data

Currently, oil imports constitute around 26% of total imports as of May 2018 compared with 20% in May 2017. The surge in international crude prices is palpable.

The good news is that the growth in non-oil imports has significantly fallen in the past one year, offsetting the impact of rising crude oil price on India’s trade deficit.

This is despite the weakening of rupee against dollar. When rupee depreciates, imports become more expensive and it should have risen higher.

 

Let us first look at what constitutes non-oil imports and how they fared.

This basket is largely made up of gold, precious stones, iron, steel, pharmaceutical products, transport equipment, food, edible oils etc.

The import of gold and other precious stones, which has a significant share in India's non-oil imports, took a plunge of 4.9%.

Whereas, iron and steel imports increased by 32%, imports of pharmaceutical products were up 20% and transport equipment imports grew by 22% during May 2017 over the same month in the previous year.

The increase in imports of productive assets such as iron and steel, transport equipment etc. signifies robust domestic demand and infrastructure development.

On the other hand, contraction in gold and precious stone imports is a good sign for the India economy in the long run.

Gold is a common investment choice among Indians since ages, which have always worried the government as more money blocked up in gold can curtail liquidity and can impact infrastructure investment and can also adversely impacts various other drivers of the economy.

Falling gold imports also gives the government enough dollars to shore up the rupee, when depreciating.