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After contracting by 1.1 per cent in October, India’s merchandise exports grew by a staggering 30.6 per cent in November, showed the latest data from the Ministry of Commerce and Industry (Chart 1). Excluding oil, exports grew at a robust 28.2 per cent (Chart 2). Over the entire April-November period in FY18, exports grew at a healthy 12 per cent. Imports also registered a strong performance, growing by 19.6 per cent in November. Excluding oil and gold, imports were up 22.6 per cent, suggesting strong domestic demand. As shown in Chart 3, the top export items in November were engineering goods followed by petroleum products, gems and jewellery, organic and inorganic chemicals, pharmaceuticals, and textiles. On the other hand, the top import items were petroleum products, electronic goods, gold, machinery, electrical and non-electrical products, and pearl, precious and semi-precious stones (Chart 4). Based on these numbers, the trade deficit for November is pegged at $13.82 billion, which is only slightly lower than the 35-month high of $14 billion recorded in the previous month.
This is likely to put upward pressure on the current account deficit (CAD). As shown in Chart 5, the CAD had slipped to 1.2 per cent of GDP at the end of Q2, from 2.5 per cent in the previous quarter.This recent spurt in exports, the contraction in the previous month notwithstanding, comes at a time when the rupee has strengthened against the dollar (Chart 6). As shown in Chart 7, on the Reserve Bank of India’s (RBI) index too, the rupee continues to remain overvalued. Perhaps stronger global growth, other Asian economies are also witnessing strong export growth (Chart 8), is helping push the country’s exports despite an overvalued currency.