Exports continued to shine amid slowing down of other sectors of the economy, though pace of growth has decelerated in September due to external headwinds.
However, the growth in September was a five-month low. India’s exports now constituted much more of engineering, electronic and petroleum products than traditional items like textiles.
Also, the share of the European Union and North America combined has come down by 10 percentage points to 30 per cent in India’s exports between 2004-05 and 2010-11.
“The good run continues, though there are clear signs of slowdown... It is clear that there is deceleration in growth... This is the surest sign of times to come. That is telling you what is going to happen in future,” commerce secretary Rahul Khullar said.
Imports on the other hand, grew by 17.2 per cent in September, the lowest in five months. In absolute numbers, they stood at $34.6 billion.
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For the first six months, exports grew 52.1 per cent to $160 billion compared to the corresponding period of last financial year, and imports by 32.4 per cent to $233.5 billion.
Interestingly, imports of gold and silver rose by a whopping 80 per cent to $31.1 billion during April-September, which Khullar attributed to asset switching. “People are moving out of cash and switching to gold,” he said.
Even after factoring slowdown in major advanced economies, Khullar was pretty sure the target of $300 billion of exports for this financial year will be in the striking range.
“At this point of time, I will say the best estimate is in the neighbourhood of $290 billion to $300 billion and that is taking into account bad news available,” he said.
However, widening balance of trade may cause a problem at the time when there are signs of slackening demand elsewhere.
Trade deficit stood at $73.5 billion in the first six months, which is quite a high number, according to Khullar.
On a pro-rata basis, it means $147 billion trade deficit this financial year. But, Khullar said growth in imports would come down much faster than exports in the remaining period of this financial year.
He did not agree to the view that in the current situation when India is not recording such a slow growth rate as other countries, imports will grow much faster due to the needs of the economy than exports. Tax collections do corroborate Khullar’s this since customs duty, mop up was just 7.2 per cent in September and 19.4 per cent in the first six months of this financial year, clearly showing decelerating tax numbers.
However, Federation of Indian Export Organisations said the trade deficit number was huge and may touch $150 billion by the end of 2011-12, “which is a matter of concern”.
Khullar said in the event of slackening foreign capital inflows, there should not be high trade deficit, as it might widen current account deficit, which would be difficult to finance.