 "Export volumes up in some sectors despite slow down in demand")
The fall in Indian merchandise exports for the tenth straight month, ended September, 2015, was mainly driven by falling global commodity prices and not necessarily declining export volumes, economic research firm and ratings agency India Ratings and Research (Ind-Ra) said on Monday.
Saying the volume demand for Indian exports may not have suffered significantly during the period, Ind-Ra said a global freefall in export prices of agricultural, crude oil and related products were to blame for heavy decline in the outbound shipments, value-wise.
The rating agency said export volumes in certain categories continued to increase. For instance, it said automobiles exports rose 14.9 per cent in FY15, jumping from 7.3 per cent in FY13. Value of agriculture exports, which account for 9.7 per cent of total export in value, fell 19.1 per cent on a year-on-year basis.
Similarly, crude oil and its products, (18.3 per cent of FY15 merchandise exports) declined in value, 45.4 per cent year-on-year. The decline in these two categories alone accounted for around three-fourths of the overall decline in merchandise exports, it said.
Also, the sharp fall in the prices of other commodities along with lower crude oil rates has depressed prices of many intermediate and manufactured goods.
Consequently, the value of exported items has shrunk. A weak euro also contributed to Indian merchandise exports witnessing an aggregate 15.1 per cent year-on-year fall, in dollar terms, over eight months leading to September.
The euro fell by 17.1 per cent over the last one year, Ind-Ra said. The rating agency said the slowdown in economic activity in countries in Asia and Africa, which account for more than half of India's merchandise exports, may be a bigger challenge to India's export growth than demand from the United States (13.7 per cent of merchandise exports) or Europe (18.1 per cent). Ind-Ra added the demand conditions in the US and Europe are likely to continue to grow at a gradual pace and, therefore, will support export volumes from India in the near term.
However, export growth to Asian (49.6 per cent) and African (10.6 per cent) regions is likely to remain subdued, as economic activity in these regions has moderated due to falling commodity prices, volatile exchange rates, and moderating domestic demand.
The agency believed the prices of most major commodities are close to their lowest. However, merchandise exports (in dollar terms) are expected to post single-digit negative growth for the rest of FY16, given that commodity prices will continue to be lower on a year-on-year basis. A marginal uptick in exports (in dollars) is likely from first quarter, FY17, driven by the base effect.
