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On a day when Prime Minister Narendra Modi tried to hard-sell India in Australia, data released showed merchandise exports fell 5.04 per cent to $26.09 billion in October from $27.48 billion a year earlier. The fall in exports, the first this financial year, comes at a time when the government is pushing policy measures, as well as campaigns such as ‘Make in India’.
The decline was primarily due to exports of major export items such as engineering goods, drugs and pharmaceuticals and gems and jewellery falling 9.18 per cent, 8.33 per cent and 2.25 per cent, respectively, according to data.
According to initial estimates, exports in April-October rose 4.72 per cent — from $181.23 billion to $189.79 billion. (CONCERNS ABOUND)
“The export numbers are indeed disappointing but the trade deficit does not warrant concern. With oil prices continuing to correct, the current account deficit is still on track to less than 1.5 per cent of GDP (gross domestic product), even lower than last year. The bigger concern is growth. The disappointment on Japanese growth notwithstanding, lower oil and commodity prices will provide purchasing power to developed economies. This should help emerging market exports, as India’s new export orders suggest,” said Sajjid Chinoy, chief India economist, JP Morgan.
Trade deficit for October rose to $13.35 billion from $10.59 billion in October 2013. In September this year, it had widened to $14.25 billion.
In October, imports rose 3.62 per cent to $39.45 billion from $38.07 billion in October 2013. For April-October, these stood at $273.55 billion, up 1.86 per cent from $268.55 billion in the corresponding period last year.
“There is concern on slowing of Germany and China, and Japan going into recession. The outlook for global trade is also looking bleak. It is going to be a challenge to crack an increased market share in these slowing markets. However, one must not lose sight of jobs migrating out of China, which could be a huge window of opportunity for India,” said Ajit Ranade, chief economist, Aditya Birla Group.
Since the beginning of this financial year, the export of goods from India has been seeing a considerably healthy run compared to 2013-14, though a lot of it is the result of a low base.
In May and June this year, exports had seen double-digit growth, prompting the government to set an export target of $350 billion for this financial year.
Siddhartha Sanyal, India chief economist, Barclays, says the fall in Indian exports marks the “resurfacing of weakness in global demand…India’s exports might face some pressure in the coming months”, he said. This, he added, wouldn’t pose any challenge to the country’s current account deficit.
According to a note by CRISIL, India’s current account deficit for this financial year will stand at $32 billion, or 1.4 per cent of GDP, as was the case last financial year. This will primarily be due to reduced oil prices and continued restriction on import of gold.
“Upbeat data from the US is a sigh of relief and is expected to offset some of the downside risks to India’s export momentum in the coming months,” said Shubhada Rao, senior president and chief economist, YES Bank.
Delay in unveiling a foreign trade policy for 2014-2019 is one of the primary reasons for such a poor performance on the export front, as exporters are unclear about the incentives to be offered, as well as sectors that will get a boost.
“Uncertainty over new foreign trade policy should be removed, as exporters are in a dilemma over costing, while contracting for new orders. At the least, the existing policy may be extended for a definite period, preferably up to March 31, 2015, or till a new policy is announced and implemented,” said Rafeeque Ahmed, president, Federation of Indian Export Organisations.
In October, gold imports soared a whopping 280.39 per cent at $4.17 billion, against $1.09 billion a year earlier. Oil imports fell to $12.36 billion, down 19.2 per cent compared with $15.29 billion in the year-ago period. Overall oil imports during April-October contracted 0.5 per cent to $94.84 billion from $95.30 billion in October 2013.
Non-oil imports grew 18.9 per cent to $27 billion from $22.78 billion in October last year. For the April-October period, non-oil imports rose 3.2 per cent to $1787.70 billion, against $ 173.24 billion in the year-ago period.
Recently, the World Trade Organization had cut its forecast for growth in world trade this year from 4.7 per cent to 3.1 per cent, citing uneven global growth.
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