The surge in merchandise exports in the year so far has baffled many, as exporters continue to battle severe infrastructure bottlenecks and procedural problems.
Total exports from India were $229.6 billion in 2010-2011 from $45.5 bn in 2000-01, up 405 per cent. Imports soared to $348.7 bn last year from $57.9 bn in 2000-01, a growth of 502 per cent. However, the growth in shipments, of exports and imports, was to 849.9 million tonnes in 2010-2011 from 368.5 mt in 2000-01, up only 130.6 per cent. Experts say the main reason behind the contrasting figures is the volatility in commodity prices, coupled with increase in export of high-value items in branded segments, that now fetch higher prices than earlier.
Also, since 2008, Indian exports have changed direction drastically, away from Western markets to the faster growing economies of Asia, the Gulf, Africa and Latin America. (Click here for graphs)
“India has become more sensitive to Asian demand, with the share of exports to developing Asia accounting for 19.5 per cent of exports in 2010, from 10.7 per cent in 2000. Nominal exports are a function of price and volume. While the monthly trade data are in nominal terms, the port or cargo data are in volume terms. The growth in exports in terms of revenue earned was due to a combination of both market diversification and a rise in prices,” said Rajeev Malik, senior economist, CLSA Singapore.
The share of shipments to advanced economies dropped to 45.2 per cent of all exports in 2010 from 64.6 per cent in 2000. Over the same period, the share of exports bound for developing economies increased to 54 per cent from 32.2 per cent, says CLSA. Apart from the jump in share of petroleum products in total exports, said Malik, there’d been an impressive increase in the share of engineering goods, especially transport equipment.
Exports of engineering goods also include several items which are sensitive to global commodity prices, with an effect on export revenue.
A Citibank report says the shares of crude oil products, gold, silver and precious stones have increased in total imports. On crude oil, India imported 163 million tonnes in 2010-11 from 111.5 mt in 2006-07. The oil bill was $105 bn in 2010-11 from around $60 bn in 2006-07. The report said imports, led by oil, would expand the trade deficit to $159 bn in 2011-12 from $119.1 bn last year.
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“The growth rates come with a lag. The growth we see now are of exports made months in advance. These high growth rates will not be sustained,” Union commerce secretary Rahul Khullar told Business Standard.
“At present, we can see a major inflation impact on our export basket, coupled with portfolio impact. Our export composition has undergone major change. In imports, gold and capital goods bloated our import bill, besides crude oil,” averred Ajit Ranade, chief economist, Aditya Birla Group.
In the coming months, he said, withdrawal of the Duty Entitlement Pass Book (DEPB) scheme, which neutralises domestic taxation effects for exporters, might have a negative impact. “Nowadays, a lot of exports that are taking place have high price volatility, such as iron ore, sugarcane and other food products,” said L Radhakrishnan, chairman, Jawaharlal Nehru Port Trust.
Presently, engineering and petroleum goods account for 42 per cent of India’s exports from 14 per cent in 2000-01, superseding textiles, agriculture goods and minerals. A major shift can also be seen in the destination markets.
“India’s exports had been surging because a lot of the high-value products such as gems and jewellery and auto components have gone into the branded segments, fetching more price. The rise was also due to the spike in commodity prices. More, the Middle East has proved a high-value market, while Chinese markets are responsible for more volume. Besides, the currency had a major role to play, as the rupee underperformed compared to other currencies in Asia,” said Abheek Barua, chief economist, HDFC Bank.
Ramu S Deora, president of the Federation of Indian Export Organisations and chairman of All India Shippers Council, said exporters still face massive difficulties due to a weak infrastructure in terms of bad roads, delay in container shipments from cities to ports and other hassles related to delay in toll gates and custom checkpoints.
“Exports are registering robust growth rates due to rise in the prices of some commodities in recent years and not because of growth in volume, which had not seen much growth. There is bound to be a slowdown. More, with the expiration of DEPB, exporters are rushing consignments to avail the benefits. The government should immediately announce an all-India drawback rate to sustain such high level of growth,” Deora said.
