Turnaround not expected till Sept, says commerce secretary.
Exports fell more than 33 per cent for the second consecutive month in April 2009, with economic recession in advanced economies adversely impacting foreign demand for Indian manufacturers.
Imports fell even more sharply, by 37 per cent, mainly because of a fall in oil prices. With imports declining at a faster rate than exports, the trade deficit — the difference between the two — narrowed 50 per cent to $5 billion in April 2009. This is also the second consecutive month the contraction in imports has exceeded the fall in exports.
| LOW TIDE FOR TRADE | ||||
| April ‘08 ($ billion) | April ‘09 ($ billion) | April ‘08 % | April ‘09 % | |
| Exports | 16.1 | 10.7 | 31.5 | -33.2 |
| Imports | 24.8 | 15.7 | 36.6 | -36.6 |
| Trade deficit | -8.7 | -5.0 | - | - |
| Source: Commerce ministry | ||||
Analysts say the latest trade data reflects continued weakness in the global economy. But they predict that export growth will hit positive territory in two or three months.
“Exports will pick up towards July primarily because of an improvement in the south Asian market and the base effect towards the second half of the year,” said Abheek Barua, chief economist with HDFC Bank.
With the country’s exports contracting for the seventh consecutive month, however, Commerce Secretary GK Pillai told reporters that a recovery in exports is not expected till September 2009, adding “thereafter we would be able to show consolidation and improvement in exports”.
Oil imports, which account for nearly a fourth of India’s import bill, declined 58 per cent to $3.6 billion against $8.7 billion in the same month last year. Non-oil imports, which comprise capital goods and raw materials used by India Inc, also contracted by almost a fourth, clocking $12 billion against $16 billion in April 2009.
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On the continued fall in non-oil imports, an indicator of the strength of domestic demand, Barua said the investment cycle is still to pick up, adding, “Imports are correlated to exports. A fall in global demand of gems and jewellery, for instance, leads to lesser imports of raw diamond.”
Economists attribute falling non-oil imports to a slowdown in industry output. "The fall in non-oil imports indicates shrinking industrial activity and crashing commodity prices,” said DK Joshi, economist with CRISIL, a ratings and advisory firm.
Better-than-expected Q4 GDP growth of 5.8 per cent, however, has encouraged some economists to see a pick-up in non-oil imports. "Non-oil imports are likely to pick up towards the third quarter as we see recovery,” said Shubhada Rao, chief economist, YES Bank. “At present domestic investment and industrial activity is low,” she added.