As in May, both merchandise exports and imports contracted in June, implying low demand abroad as well as within India, with possibly adverse repercussions for larger economic growth.
While exports fell 5.5 per cent to $25.1 billion over a year, imports were down a staggering 13.5 per cent, the biggest decline in 32 months, to $35.4 bn. This led to a 1.7 per cent decline in exports at $75.2 bn in the first quarter of the current financial year, compared to $76.5 bn in the same quarter last year. And, a 6.1 per cent fall in imports at $115.3 bn against $122.7 bn in the comparative period, Director General of Foreign Trade (DGFT) Anup K Pujari told reporters here on Friday.
The government has set a target of 15 per cent rise in exports this financial year.
After muted IIP data in May, came falling numbers for exports-imports in June
|Top five export sector performance|
|Engineering goods||$14.6 bn|
|Petroleum products||$12.9 bn|
|Gems and jewellery||$10.0 bn|
|Drugs and pharmaceuticals||$2.1 bn|
|Ready-made garments||$3.2 bn|
|Top five import sector performance|
|Petroleum products||$41.5 bn|
|Gold and silver||$9.4 bn|
|Electronic goods||$7.1 bn|
|Pearls and semi-precious stones||$4.6 bn|
|*Source: Ministry of Commerce & Industry|
These are preliminary numbers and formal official data for June will be released on August 1.
Exports were $26.5 bn in June last year and imports at $40.9 bn. In May, exports were down 4.2 per cent and imports by 7.4 per cent, over a year.
Since both exports and imports fell, with the latter witnessing a sharper decline, the trade deficit narrowed by 28.5 per cent in June, to a 15-month low of $10.3 bn, from $14.4 bn in June 2011, pulling down the deficit in the first quarter of 2012-13 by 13.5 per cent at $40.1 bn over $46.3 bn in the same period last year.
However, the government exuded confidence that the measures announced by it in its annual supplement to the Foreign Trade Policy (FTP) would push up exports in the next couple of months.
“It is distressing that for the last two months, exports have not been performing well … Exports will pick up due to the measures announced in the FTP, the benefits of which come with a lag effect. So, we hope exports will turn around in the next two to three months. We will see a spurt in exports of textiles, leather and ready-made garments,” said commerce secretary S R Rao.
The annual supplement announced last month to the FTP (2009-2014) offered a slew of measures for exporters, significant among these being extension of the interest subvention of two per cent for labour-intensive sectors and the Export Promotion Capital Goods Scheme till March 2013.
Rao added even if difficulties persisted in India’s traditional export markets of the US and Europe, the problem would be somewhat offset by the newer markets of Asia, Latin America and Africa. He said the government was aggressively positioning Indian goods in these markets to minimise the loss.
According to Rupa Rege Nitsure, chief economist, Bank of Baroda, the new markets have not been able to support Indian exports well. “The new markets have not changed our export basket drastically. The slowdown on Friday is more broad-based compared to 2008, so these markets are now also suffering. We still heavily rely on the developed world for our exports. I believe the negative trend is going to continue till the second quarter at least,” she said.
Some of the sectors that performed poorly in exports were handicrafts, carpets, jute, tea, plastic, cashew nuts and coffee.
“Contraction in global demand and deceleration in manufacturing are the primary reason for decline in exports. However, the global situation is slowly improving and we expect exports to be at a takeoff stage by October,” said M Rafeeque Ahmed, president, Federation of Indian Export Organisations.
The fact that crude oil imports were up at $12.6 bn in June against $10.2 bn in the same month last year shows very well that downward pressure is coming from the non-petroleum, oil and lubricants (PoL) side. Part of the decline in imports might have also come from reduction in gold imports, though comparative figures were not revealed.
Even then, a decline in imports by 13 per cent clearly reflects economic slowing, particularly when the trade data came after industrial growth showed only moderate recovery at 2.4 per cent in the month of May. Nitsure said the fall in imports were a clear indication of a massive slowdown in the country’s industrial and larger economic activities.
Services exports at $12 bn
Unlike contraction seen in merchandise exports, India’s services exports in May 2012 rose albeit marginally to $12.05 billion from $ 11.8 billion in the year-ago period.
Services payments (imports), too, rose in May. They stood at $7.7 billion, up from $7.08 billion in May in 2011, according to Reserve Bank of India.
Services exports for April-May 2012 stood at $ 22.53 billion while imports stood at $ 13.96 billion.