Merchandise exports plunged 20.7 per cent to $21.3 billion in August from $26.8 billion in the year-ago period, the ninth consecutive monthly decline and the steepest in the first five months of this financial year. The fall resulted from a massive demand slowdown in global markets and an uncertain global economic environment, owing to a crisis in China.
The value of exports in August was the lowest in about five years.
India wasn’t the only Asian country to see a steep fall in exports. A YES Bank note said exports from Korea declined 14.7 per cent in August, the most in six years, while those from China contracted 5.5 per cent.
For April-August, exports from India stood at $111.1 billion, down 16.2 per cent compared with $132.5 billion in the year-ago period, according to data released by the commerce and industry ministry on Tuesday.
“Average growth in export volumes remains subdued … In a nutshell, both the value and volume impact should continue to weigh on the exports trajectory in FY16,” said Shubhada Rao, chief economist, YES Bank.
In August, imports shrunk 9.9 per cent to $33.7 billion from $37.5 billion a year earlier. For April-August, imports fell 11.6 per cent to $168.6 billion from $190.7 billion in the year-ago period. Gold imports, however, jumped 140 per cent to $4.95 billion.
Oil imports declined 42.6 per cent year-on-year to $7.35 billion, compared with $12.8 billion in August last year. For April-August, these imports stood at $41.5 billion, down 38.8 per cent year-on-year.
Though it might appear that industrial activity saw a turnaround, as non-oil imports rose 7.01 per cent to $26.4 billion in August, a closer look shows much of the growth is coming from gold imports.
Non-oil, non-gold imports contracted 4.4 per cent, showing demand for industrial goods was yet to pick up, evident from the fact that the import of project goods almost halved to $206.7 billion in August.
For August, the trade deficit stood at $12.5 billion, compared with $12.8 billion in July. For April-August, the deficit stood at $57.5 billion, against $58.2 billion in the corresponding period of 2014.
“The trade deficit isn’t providing a cushion anymore, which is beginning to be an uneasy factor. For the past two months, it is around $12 billion and this, coupled with the fact that the withdrawal by FIIs (foreign institutional investors) is depleting forex, is becoming a concern. Unfortunately, due to this, advantages from a fall in crude oil prices aren’t available to us,” said Madan Sabnavis, chief economist, CARE Ratings.
In August, goods that fared poorly in terms of exports included petroleum products, which declined 47.9 per cent to $2.77 billion. While exports of engineering goods fell 30 per cent, those of iron ore declined 34.3 per cent and electronic goods 17.4 per cent. Exporters said softening of the prices of key agricultural and industrial inputs, coupled with a contraction in global demand, was the primary reason behind the decline.
The Federation of Indian Export Organisations appealed to the government for “immediate introduction” of three per cent interest subvention and sought the commerce and industry minister’s intervention in the matter.
In a recent interaction with Business Standard, Commerce Minister Nirmala Sitharaman had said the government would roll out the interest subvention scheme soon.
During the month, imports shrunk 9.9 per cent to $33.7 billion from $37.5 billion in August 2014. For April-August, imports fell 11.6 per cent to $168.6 billion from $190.7 billion in the year-ago period.
Aditi Nayar, senior economist, ICRA, believes the surge in gold import is due to a decline in prices.
The trade deficit widened to $12.5 billion in August from $10.8 billion in the corresponding month last year. For April-August, the trade deficit was $57.5 billion, against $58.2 billion in the year-ago period.
'The trade deficit isn't providing any cushion anymore, which is beginning to be an uneasy factor. For the past two months, it is at around $12 billion and this, coupled with the withdrawal of FIIs (foreign institutional investors), is causing depletion in forex and is a concern. Unfortunately, due to this, the advantages of a fall in crude prices aren't available to us,' said Madan Sabnavis, chief economist, CARE Ratings.
He added despite the rupee being the strongest among emerging market currencies, Indian exporters aren't able to avail of this due to shortage of demand.
Oil imports declined 42.6 per cent to $7.35 billion from $12.8 billion in August last year. For April-August, these imports stood at $41.5 billion, 38.8 per cent lower than $67.8 billion in the year-ago period.
Non-oil import stood at $26.4 billion, 7.01 per cent more than $24.65 billion in August 2014. For the first five months of this financial year, non-oil imports were $127.1 billion, up 3.39 per cent year-on-year.