Rupee rise takes toll on export growth

August was the second month of slow growth as the appreciation in the rupee adversely effected the level of exports.

In July this year, export growth was only 5.75 per cent, down from 13.5 per cent in May and 10.9 per cent in June this year.

In rupee terms, in fact, exports in August this year were 1.5 per cent lower than in August 2002.

The overall export growth for the year will be only around 6 per cent as against a target of 12 per cent, say experts.

Data released by the commerce ministry puts import growth in August 2003 at 15.5 per cent. Driven by a revival in manufacturing, the level of imports rose to touch $ 5.6 billion from $ 4.3 billion in the corresponding month last year.

Lower exports and strong import demand have led to a worsening of the trade deficit which was $ 1.05 billion in August this year as against $ 0.48 billion in the corresponding month last year.

"The bulk of increment in exports in the last few years has been to the US and the US economy is not doing well. Western Europe, another major market, is faring even worse," points Saumitra Chaudhuri, Economic Advisor, ICRA.

"The year would see an overall export growth of only about 6 per cent," he adds.

However, while the rupee has hardened against the dollar, it has also softened against the euro and it would not be right to attribute the low level of exports entirely to the appreciating rupee, he feels.

In the April to August 2003-04 period, the overall import growth was 9 per cent as against an annual export growth target of 12 per cent.

While exports had grown by 18 per cent in the previous fiscal, this years target was set at a lower level on account of worries about global economic recovery and rupee appreciation.

In value terms, the level of exports touched $ 22.5 billion, up form $ 20.6 billion in the first five months of the previous fiscal.

Imports grew by 22 per cent in this period, with the value of imports going up to $ 28.5 billion, up from $ 23.3 billion in the corresponding period last year.

In this period, non-oil imports rose by 28.4 per cent to reach $ 7.1 billion, indicating a high level of demand for industrial inputs, while the level of oil imports went up by 7.9 per cent to touch $ 7.7 billion.

Trade deficit in the first five months of the fiscal is touching $ 6 billion as against a deficit of $ 2.7 billion.