- Feb trade deficit narrows to $27.1 bln from $34.68 bln in Jan
- Exports rise marginally, imports decline month-on-month
- Hormuz crisis poses risks to energy supply, says trade secretary
- Government considering support measures for affected exporters
- Secretary says India-US trade deal to be signed once US finalises tariff regime
NEW DELHI, Mar 16 (Reuters) - India's merchandise trade deficit narrowed in February as imports eased from a month earlier, though economists have warned that the escalating Middle East crisis could stall shipments and raise costs for the energy-importing country.
A blockade of the Strait of Hormuz, a key route for global oil and gas, has already disrupted shipments, including those of liquefied natural gas, rice, fertilisers and could affect India’s broader trade with the region.
"This year has been challenging for Indian exports and there are logistical challenges due to the West Asia crisis," Rajesh Agrawal, India's trade secretary, told reporters on Monday, adding the government was considering measures to support affected exporters.
Shipments to the Middle East, estimated at about $100 billion annually, have been hit by the regional conflict, he said.
India's trade deficit narrowed to $27.1 billion in February from $34.68 billion in the previous month, data released by the commerce ministry showed. Economists had expected the trade gap at $28.8 billion, according to a Reuters poll.
Merchandise exports rose marginally to $36.61 billion in February from $36.56 billion a month earlier, while imports fell to $63.71 billion from $71.24 billion.
INCREASING UNCERTAINTY
A prolonged war in the Middle East has heightened uncertainty over India’s energy security and trade. The government has asked consumers to avoid panic buying of cooking gas cylinders and proposed an "economic stabilisation fund" to create fiscal space to respond to global headwinds.
New Delhi has also stepped up purchases of Russian oil from March, the trade secretary said, after the U.S. temporarily waived sanctions, allowing countries including India to buy Russian oil currently stuck at sea.
India, the world's No. 3 oil consumer, imports more than 80% of its crude oil needs and 60% of its cooking gas, with the Middle East accounting for a large chunk of the supply.
The government estimates services exports at $31.65 billion and imports at $14.51 billion for February, resulting in a services trade surplus of $17.14 billion, according to a Reuters calculation.
U.S. TARIFF RELIEF AND TRADE TALKS
A U.S. Supreme Court ruling against President Donald Trump’s sweeping tariffs in February has resulted in lower tariffs for countries including India, benefiting exports of textiles, jewellery and food products.
However, policymakers are concerned that new U.S. trade investigations into excess industrial capacity against India, along with 15 other major trading partners, could hurt exports over the coming months.
The government is examining the legal implications of the probe, the trade secretary said, adding that New Delhi is still working on the final details of the proposed deal with Washington.
"We had expected to sign the U.S. deal in March, but a Supreme Court ruling changed the tariff framework,” he said, adding there was "no stand-off" in the talks and the signing would follow once the U.S. finalises its new tariff structure.
Merchandise shipments to the U.S., India's largest export market, rose about 3.5% month-on-month to $6.83 billion in February.
Reporting by Shivangi Acharya, Manoj Kumar, Sarita Chaganti Singh; Editing by Mrigank Dhaniwala
Source: Reuters