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Even after exports rose by more than 25 per cents in September, economists and exporters alike have advised caution against celebrating the return of sustained trade growth.
Despite issues over liquidity, exports grew at a six-month-high rate of 25.7 per cent in September year-on-year, maintaining the momentum of 13 months of interrupted rise under the Goods and Services Tax (GST) regime. However, experts said the rise in September was drastic and do not reflect the supply side issues being faced by the industry.
The recent set of easing in GST norms which happened in October may take time till November or December to be reflected in the charts, they added. This includes the government continuing the duty drawback scheme through revised rates post October and easing the filing of GST documents.
"While I am happy at the high levels of growth shown by the industry in September, it should be kept in mind that exporters tried to push out built up stocks till September 30, when the old duty drawback scheme was to be stopped." Ganesh Kumar Gupta, President of the Federation of Indian Export Organizations said.
Also, goods shipped by merchant exporters in labour intensive sectors such as handicrafts, carpets and non-apparel textiles have not seen a considerable rise, Gupta added, pointing out that export growth may be 1-2 per cent more than the 9.59 per cent growth seen in October 2016.
On the other hand, the two primary sets of commodities that led the export rally - engineering goods and refinery products - did soon the basis of rising international commodity prices.
In the third month into the GST, export growth picked up mainly owing to rising global crude prices, which pushed up processed petroleum exports by nearly 40 per cent, apart from a broad-based improvement in exports of major foreign exchange earners such as engineering goods which rose by a high 44 per cent.
"This is not reflective of a sustained recovery in India's export capabilities as prices may change anytime. If we see exports grow at about these levels for a succession of 3 months, then we can expect a sustained rise and see annual exports top $300 billion in the financial year", Madan Sabnavis, Chief Economist at CARE Ratings said.
The consistent rise of the Rupee is also expected to dampen export growth and reduce competitiveness as economists predict it to appreciate in October and November.
While the Rupee had continued to weaken throughout September owing to foreign investors pulling out capital from the Indian economy, the reverse is expected to hold true in October.
As of Monday evening, the currency was Rs. 64.74 to the United States Dollar. Also, as compared to the Indian Rupee, the currencies of competing developing nations such as Vietnam and Indonesia have seen a sharper depreciation, Sabnavis said.
In September however, non-oil, non-gold imports rose by 19.76 per cent, marginally down from over 20 per cent in August, signaling that the industrial sector may continue to show high growth for the second consecutive month in September.
On this note, experts said outbound trade is tipped to rise over the next 4-6 months as the Foreign Trade Policy, set to be released in early November, makes structural changes in export norms and global demand for Indian exports pick up.
"For the past couple of years, global GDP growth has consistently been more than trade growth. Apart from protectionism, collapse in commodity prices had been a prime reason. But with prices now elevated and economic outlook of major economies such as the United States, European Union and China looking better, exports may rise over the next couple of months", Devendra Pant, Chief Economist at India Ratings, said.