While it has been a weak trend since July 2014, exports have been witnessing contractions since January this year right through April. In fact, generally the last quarter of the fiscal turns out to be much better to make up for the previous quarters. However, it has been a different situation in the last quarter of fiscal 2014-15 and the first month of 2015-16, the ASSOCHAM paper said.
Engineering products, gems and jewellery and petroleum products are the biggest contributors to the overall export basket in terms of value. In the previous fiscal, while engineering goods registered a modest increase, the other two segments have been witnessing sharp drop.
The trend is likely to continue at least for gems and jewellery, while the situation may somewhat stabilize for the petroleum segment since after seeing a sharp fall, the crude oil prices have stopped seeing much of drop. Petroleum exports are related to the prices of crude oil.
According to the ASSOCHAM paper, the US is still not firm in growth as was witnessed in the first quarter of 2015 when its economy had contracted. Stronger dollar hit the US exports. In the Euro zone, it was somehow better in Q1 but it is quite puzzling and unsure. The emerging market pack remains in a challenging situation with China adding to the major woes.
Overall the trade confidence is quite muted, ASSOCHAM Secretary General, Mr D S Rawat said, impressing on the government to move fast on improving ease of doing business and reduce the transaction costs for the Indian shipments.
Going forward, the merchandise exports are likely to average around USD 22-25 billion a month till the end of second quarter of the current fiscal. The shipments would improve thereafter, but the upside remains limited, the paper noted with concern.
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However, the impact of the flat or some drop in exports would not have major impact on the trade balance since imports too would remain in muted form because of the poor consumption demand in the domestic Indian economy. Imports too would remain between USD 440-450 billion in the current fiscal ---more or less in sync with the previous year.
ASSOCHAM agrees with the assessment of the RBI which had stated in its credit policy that the net exports are, unlikely to contribute as much to growth as did in the past, the paper said.
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