India's export growth is not just oil-driven

India's export growth is being fueled by not only petroleum products but also by non-oil goods like engineering products and gems and jewellery.

If these sectors are taken out, the growth during the first four months (April-July) of 2007-08 comes to 14.77 per cent, as against the 19.26 per cent overall (in dollar terms).

Experts say the increase in exports from these sectors is mainly due to high-value imported inputs. "As input costs are high, the final product has a higher value," said KT Chacko, director, Indian Institue of Foreign Trade.

"Value-addition in gems and jewellery and petroleum products is minimal and so exports from these sectors do not benefit the economy much," he said.

Gems and jewellery exports rose by 24.82 per cent in April-July against a dip of 0.12 per cent a year ago. This added valuable momentum to exports during the period as the sector comprises 12.59 per cent of India's merchandise exports.

Industry sources say the increase can be attributed to slashing of the import duty on jewellery this year. As a result, the jewellery items that are not getting sold are being imported, added value to and then exported.

Another sector which added to the growth was the engineering goods, which comprise machine tools, instruments, transport equipment and manufactured metals products. The sector constitutes one-fifth of the total export basket and exports from it grew 22 per cent.

Though this growth was much lower that the 32 per cent in the year-ago period, it added muscle to the growth in the April-July period.

The engineering sector maintains that the growth is only in value terms as prices of steel have increased by as much as 70 per cent in the last three years.

"In volume terms, the growth has not been much, and this will effect the bottom lines of the companies this year," said Rakesh Shah, chairman, Engineering Export promotion Council.

Obviously, one of the major reasons for the export growth is petroleum products, which comprise 17.5 per cent of the export basket.

According to experts, the effect of the appreciation of the rupee is most evident while taking into account the growth rate in rupee terms.

"The decrease in exports in dollar terms is a pointer to the fact that the capacity of exporters to export is decreasing as the rupee is appreciating. With a strong rupee, an exporter may not find the business worthwhile," said Chacko.