New Delhi, April 19: The export of services has helped in bridging the trade deficit, commerce minister Kamal Nath said here today.

He said merchandise imports were much higher than merchandise exports, creating a big deficit, but “taking into account the export of services, the position improves substantially.”

Observers were surprised by the minister’s announcement of merchandise exports hitting the target of $125 billion for 2006-07.

Exports for the first 11 months of the fiscal were $109.1 billion or $9.9 billion per month. This means exports in March were $16 billion, much more than the average for the 11 months.

The minister said merchandise exports in 2006-07 were $124.63 billion, while non-oil imports during this period were $124.1 billion and oil imports $57.22 billion.

However, the trade gap was bridged by service exports which were $71.6 billion.

The minister added that earnings on the invisibles account were $23.45 billion.

High non-oil merchandise imports indicated a heavy demand for capital goods and raw materials which is good for the economy.

Industry chambers today welcomed the measures taken in foreign trade policy review to boost exports but voiced concern over the impact of appreciating rupee on exporters.

Ficci president Habil Khorakiwala said the initiatives would give a big push to India’s exports.

The Federation of Indian Exporters (Fieo) said exemption of service tax and concessions given to status holders for infrastructure development meant for agro-processing would encourage them to enter this sector and boost exports.