New Delhi: Export growth has slipped into the negative zone after over a year, contracting 1.12 per cent in October primarily because of the liquidity problem being faced by the exporters following the rollout of the goods and services tax.
Consequently, the trade deficit widened almost to a three-year high of $14 billion during the last month against $11.13 billion in October 2016 as imports surged.
Exports dipped to $23.09 billion in October from $23.36 billion in the same month last year.
The last time when exports were lower was in August 2016.
Overseas shipments of several key sectors such as textiles, pharmaceuticals, leather and gems and jewellery recorded contraction during the last month.
Commenting on the trade data, FIEO president Ganesh Kumar Gupta said the fall was expected as exporters were facing liquidity problem to pay the goods and services tax for four months in a row without getting any refund.
"The implementation of the measures approved by the GST Council is not taking place. As a result challenges faced by the exporters remain the same....exports should be kept out of the purview of the GST as paying the tax first and getting refund is cumbersome, complex and complicated affecting exports," the Federation of Indian Export Organisations said in a statement.
Aditi Nayar, principal economist with Icra, said "although the merchandise trade deficit flared up in October 2017, it may not be a source of alarm, as the average trade deficit for September-October 2017 is in line with the trend in the months of July 2017 and August 2017".
Imports in October grew 7.6 per cent to $37.11 billion from $34.5 billion in the year-ago month, the commerce ministry data released on Tuesday showed.
Meanwhile, the government plans to come out with a mid-year review of the foreign trade policy to boost exports by offering incentives packages as global trade picks up.
"Very soon, we will come out with a mid-term review of our foreign trade policy," commerce minister Suresh Prabhu said at an event here on Tuesday.
Gold imports dipped by 16 per cent to $2.94 billion last month.