Current account deficit numbers inflated,claims Edelweiss report

With the current account deficit projected to close out year 2012-13 with a figure of 5 per cent,the chief culprit is the rising oil import bill

Written by ENS Economic Bureau | New Delhi | Published: April 4, 2013 1:47:51 am

With the current account deficit projected to close out year 2012-13 with a figure of 5 per cent,the chief culprit is the rising oil import bill along with gold. But a research report by Edelweiss Research has questioned the figures issued by the ministry of commerce to claim the numbers were inflated.

“What is striking is that oil prices trend and crude oil imports bill are on a diverging trend. This disconnect is only possible if there is a significant volume surge. However,volume surge is hard to explain,” a report on the sector issued by the investment advisory firm on Wednesday notes. It explains that neither the exports of petro products have jumped,nor have the domestic consumption picked up when there is a severe downturn in the economy to conclude there is a “possible exaggeration in the oil import bills”.

According to a report written by Kapil Gupta and Toshi Jain from the company,current account deficit could be 0.8 per cent lower instead of the 5 per cent estimated as of now i.e. at 4.2 per cent. They have compared the data from the oil ministry with that of commerce ministry to find that the latter’s net oil imports data could be inflated by about $15 billion.

The report,a part of Market Musing an initiative from Edelweiss Research to capture trends that it claims are unreported in regular reports says net crude oil import data (a proxy for domestic consumption) provided by the oil ministry for the fiscal year is $96 billion “whereas according to commerce ministry data,it would be $ 115 billion”. It says that while April-December net crude import is $85 billion “we assume another $30 billion in March quarter. This implies that (commerce ministry) data is exaggerated by $15 billion”.

Commenting on the analysis trade expert and director of RIS,a Delhi based think tank Biswajit Dhar said the broad conclusions seem reasonable. He said these discrepancies were regularly seeping into the data stream of the government and which needed to be reconciled.

The analysts have also shown that the differences cannot be reconciled by possible higher exports. The data is of net oil imports which is gross oil imports deducted by exports of refined petro products “which has continued to rise over the last few quarters. This means that increase in crude imports is meant to meet the rising domestic demand rather than higher exports”. But as the economy is slowing in the same period,this rise is inexplicable,they argue.

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