Merchandise exports contracted for the eighth consecutive month.
Merchandise exports contracted for the eighth consecutive month as continued economic recession in developed economies affected overseas demand for Indian goods. While exports are expected to pick up in the later part of the quarter ending by September this year, imports could swing into the positive territory, if the domestic demand revives and crude oil prices increase.
Data released by the commerce ministry today revealed that merchandise exports dipped 29.2 per cent in May 2009 and stood at $11 billion, as against $15.5 billion in the year-ago period.
Imports also dipped for the sixth month in the running, pointing towards weak appetite for goods in the domestic economy. It contracted by 39.2 per cent to $ 16.21 billion in May.
The trade deficit — difference between exports and imports value — shrunk by 53.3 per cent in the month under consideration and stood at $5.2 billion. With oil imports contracting due to weak international prices, the trade deficit has been dipping in the last five months. Weakening trade deficit and stronger foreign direct investment (FDI) inflows led to the India’s current account become surplus for the first time in two years in the three months ended March 2008.
According to sources, the finance ministry has recognised that the three stimulus packages have not led to desired results in the exports and the manufacturing sector. the commerce ministry had recommended slashing of fringe benefit tax for exporters as well as enhancing the level of interest subsidy for export-related loans, among others, in its Budget wish list. Finance Minister Pranab Mukherjee is scheduled to present the Union Budget for 2009-10 on July 6.
The latest data are broadly in line with expectations of experts. “The need of the hour is to improve the current account position by boosting exports. On the other hand, the policy makers should build the robust foreign investment pipeline which would strengthen the capital account balance,” said Soumendra K Dash, chief economist, CARE Ratings.
The fall in imports has been attributed to the decline in the crude oil Bill of the country. In the month under consideration, India’s oil imports stood at $4.13 billion, a dip of 60 per cent over $10.5 billion in May 2008.
Non-oil imports which comprise capital goods as well as raw material used by India Inc. also contracted by almost a fourth and stood at $12 billion, as against $16.18 billion in the year-ago month. This shows the weak domestic demand in the Indian economy, in the backdrop of the global economic recession.
| EXPORT AND IMPORT FIGURES | ||||||||
| May ’08 ($) | May ‘09 ($) | April- May ‘07-’08 ($) | April -May ‘08-’09 ($) | May ‘08 (Rs) | May ’09 (Rs) | April-May ‘07-’08 (Rs) | April - May ‘08-’09 (Rs) | |
| Exports (% growth) | 27.36 | -29.2 | 36.54 | -31.2 | 31.55 | -18.4 | 35.32 | -17.4 |
| Imports (% growth) | 38.17 | -39.2 | 38.9 | -38 | 42.72 | -30 | 37.81 | -25.6 |
| Source: Department of Commerce and RBI | ||||||||
Exporters maintain that if quick steps to boost exports are not taken, there could be job losses. “If the government provides necessary support, export may show positive growth from October this year, though double-digit growth could only be seen in 2010,” said a statement released by A Sakthivel, president, Federation of Indian Export Organisations.
