Fluctuations in currency, oil prices and global demand slowdown hit trade data

India’s exports fell for the sixth straight month in May, government data showed on Tuesday. Exports declined to $22.3 billion, a 21 per cent decline compared to $27.8 billion in the corresponding period last year. 
 

But the headline number may be overstating the actual fall. Part of the decline is due to currency fluctuations. In rupee terms, exports declined by 14.1 per cent. Fluctuations in global crude oil prices may have also been a factor, as petroleum forms a substantial portion of our exports. 
 

Sluggish global demand could be another factor. US GDP contracted 0.7 per cent in the quarter ending March 2015. But, while economists expect growth to be higher in the second quarter, demand continues to remain muted. China, which is also a large trading partner of India, saw imports plummet, indicting sluggish domestic demand. Imports slid 17.6 per cent in May, after falling 16.2 per cent in April. Thus lower Chinese growth could have also weighed down heavily on export growth. 

Export powerhouse, China, too saw its exports fall. Exports fell by 2.5 per cent in May. These numbers also suggest that global demand continues to remain sluggish, highlighting the daunting challenge the government faces as it seeks to replace China as the global manufacturing hub and emerge as an export powerhouse. 
 

Imports also fell to $32.7 billion in May, down 16.5 per cent compared to the previous year. As a result, the trade deficit narrowed down to $10.4 billion compared to $11 billion in April. 
 

Part of the decline in imports can be attributed to the fall in oil imports. Oil imports during May 2015 were valued at $8.5 billion, almost 41 per cent lower than imports in the corresponding period last year. 
 

The fall in gold demand is another reason why imports fell. Gold imports declined to $2.42 billion, from $3.12 billion the previous month.