Slackening demand abroad triggered a contraction of exports for a seventh straight month in November, with outbound shipments declining 4.2 per cent to $22.3 billion against $23.3 billion in the same month last year, prompting the government to assure exporters of more incentives coming for them.
In fact, exports fell faster than the 1.7 per cent in the previous month, belying expectations that the deceleration in shipments would come down.
“It (incentive package) will hopefully come by the end of the week. We are waiting for final confirmation from the ministry of finance. We are trying to give a fillip to sectors which contribute most to exports’ performance,” said Commerce Secretary S R Rao, while releasing the data.
The data showed that imports, however, increased 6.4 per cent to $41.6 billion during the month compared to $39.1 billion, pushing the trade deficit to $19.3 billion against $15.8 billion in November 2011.
Rafeeque Ahmed, president, Federation of Indian Export Organisations, said, “With the slowdown in global trade, pricing has become a key issue and extension of some fiscal benefit by the government will help exporters to factor these in their prices to procure such orders, which are being lost by them, either for wafer-thin margins or for a loss.”
Cumulatively, between April and November this year, exports registered a fall of six per cent to $189 billion, while imports recorded a decline of only 1.6 per cent at $318.7 billion. Consequently, the trade deficit rose to $129.5 billion, higher than the $122.6 billion reported in the same period last year. This could dash the initial optimism of the commerce department, that the trade deficit would be lower this year against the $185 billion in 2011-12.
Earlier, imports also contracted till August, so the deficit was under control. However, now even the trade deficit has started rising, which would aggravate the current account deficit (CAD), projected to come down to 3.6 per cent of GDP this year by the Prime Minister’s Economic Advisory Council, against 4.2 per cent in 2011-12.
Madan Sabnavis, chief economist, CARE Ratings, said, “CAD is likely to end close to four per cent of GDP, higher than the targeted 3.6 per cent.” If indeed CAD rose to four per cent, it would be a consecutive year when it remained higher than even in the balance of payments crisis period, when it stood at three per cent.
However, the two situations are also dramatically different, as India now has forex reserves of $294 billion, against a meagre amount at the time of the BoP crisis.
“It is unlikely that exports will recover in the coming months, given the recession in the Euro zone and recovery slowing in the US on concerns of the fiscal cliff,” Sabnavis said. He said there might be a marginal recovery in outbound trade, only because exports declined in the later months of 2011-12.
Within imports, oil was 16.8 per cent higher at $14.5 bn in November, while non-oil imports were up slightly by 1.5 per cent to $27 bn. Cumulatively, oil imports were up 10.8 per cent at $110.1 bn in the first eight months of this year, while non-oil declined 7.1 per cent to $208.6 bn. So, there is partial recovery in non-oil imports, a a glimmer of hope on industrial revival.
"With the improvement in industrial growth, non-oil imports are likely to go up, along with oil imports putting pressure on the trade deficit and thereon on CAD," Sabnavis said.
Rao said the increased demand in petroleum products was distressing. Crude oil imports continue to be very high, he admitted.
GDP in America grew 2.7 per cent in the third quarter of this year, the fastest since late 2011. The Euro zone, on the other hand, was in recession.
