Notwithstanding some of the recent economic indicators that have shown an impending slowdown of the economy, merchandise exports from India in May grew by an enormous 56.9 per cent at $25.9 billion while imports too surged to $40.9 billion, up 54.1 per cent year-on-year. The government is going to undertake yet another sector-wise review soon to ascertain which particular segment still requires financial assistance by the government.
Some of the major indicators that have reflected a downtrend across all sectors were the industrial production that came down to lowest in seven months to 6.3 per cent in April from 13.1 a year ago, the gross domestic product (GDP) in the last quarter of 2010-2011 came down to over a year low of 7.8 per cent while the output of six core industries registered a five-month low of 5.2 per cent in April.
As a result of such a huge growth in imports, the trade deficit in May widened to $(-) 15 billion, according to the initial estimates released by commerce secretary Rahul Khullar. The official data would be released on July 1.
| NUMBERS GAME | ||
| CUMULATIVE EXPORTS (April- May) | ||
| ITEMS | Value | Percentage growth |
| Engineering Goods | 14.7 | 115.0 |
| Petroleum Products | 8.8 | 64.0 |
| Gems and jewellery | 5.7 | 23.0 |
| Cotton yarn and made-ups | 1.0 | 10.4 |
| Readymade Garments | 2.4 | 31.0 |
| Electronics | 1.8 | 80.0 |
| Drugs and pharmaceuticals | 1.9 | 16.0 |
| Chemicals | 1.8 | 44.0 |
| Leather items | 0.7 | 7.0 |
| Marine products | 0.4 | 15.8 |
| CUMULATIVE IMPORT (April- May) | ||
| Gold and Silver | 13.5 | 222.0 |
| Petroleum Products | 20.3 | 12.9 |
| Gems and jewellery | 5.2 | 24.6 |
| Machinery | 5.9 | 46.7 |
| Coal | 2.2 | 14.0 |
| Electronics | 4.7 | 16.0 |
| Transport Equipments | 1.7 | 32.7 |
| Vegetable Oil | 1.3 | 35.0 |
| Iron and Steel | 1.8 | (-)13 |
| Fertilisers | 0.7 | (-)35 |
| *Source: Initial Estimates by Ministry of Commerce and Industry *Value in $billion | ||
“This is the largest balance of payment since August 2008 when our export markets were crashing due to the financial crisis … Let us wait a couple of months and watch it. The average balance of trade so far is now up to about $12 billion a month, it is something to be worried about as we not have had such a large deficit in the last 2-3 years,” Khullar told reporters here on Friday.
Total exports in the first two months of the financial year reached $49.8 billion, up 45.3 per cent compared to the same period last fiscal. Cumulative imports, on the other hand, rose 33.3 per cent to $73.7 billion resulting in a total trade deficit of $(-) 24 billion.
Minister of Commerce and Industry Anand Sharma also expressed concern over the widening of the trade deficit in May and said it was primarily due to the volatility in the import of petroleum products.
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He also said that the government is yet to take a confirmed decision on the issue of whether to extend the Duty Entitlement Passbook Scheme (DEPB), a popular duty reimbursement scheme, which is expected to be phased out on June 30.
“We have had useful discussion with the Finance Ministry on the issue of DEPB and also reduction in the cost of credit to the industry as well as the exporters. The revenue secretary, finance secretary and the commerce secretary would also be meeting soon … We have not reached the comfort zone yet as far as our share in global trade is concerned,” Sharma said adding that the government would be conducting another sector wise review of the export-oriented firms to be completed in the next 45 days by the Directorate General of Foreign Trade (DGFT).
Exporters, on the other hand, have raised major concerns over policy instability and high cost of credit while demanding extension of DEPB.
“The uncertainty over the continuation of the DEPB Scheme beyond June has been a cause of concern to the exporters which may taper down growth,” said Ramu S Deora, president, Federation of Indian Exports Organisations (FIEO).
Export of some of the products that registered growth during April-May were engineering products that rose by 115 per cent to $14.7 billion, petroleum and lubricants by 64 per cent to $8.8 billion, gems and jewellery by 23 per cent up $5.7 billion and readymade garments by 31 per cent to $2.36 billion.
During April-May imports of gold and silver rose by an enormous 222 per cent to $13.5 billion, machinery by 46.9 per cent to $5.9 billion and electronic items by 16 per cent to $4.7 billion.
In the last fiscal, merchandise exports ended up at $246 billion growing by 37.55 per cent compared to 2009-10 while imports topped $ 350 billion in 2010-11, up by 21.6 per cent over FY10.
The trade deficit in 2010-2011 stood at $ 104 billion. The government has set a target of achieving $500 billion worth of exports by 2014 while also doubling India’s share of exports by 2020.