Exports contract for the sixth consecutive month to $11.5 billion

India’s exports declined a record 33.3 per cent in March 2009, as the continued global economic recession affected demand for goods shipped from India.

Experts said the dip in exports was expected, as advanced economies like the US and Europe, which account for more than 35 per cent of India’s exports, are experiencing a slump in demand because of the ongoing recession.

Analysts expect the current situation to continue in the first half of the current fiscal too, and expect recovery only after September 2009, when stimulus packages announced by various governments would begin to show results.

With exports in the negative territory in the second half of last fiscal (2008-09), overseas sale of Indian goods expanded by only 3.4 per cent to reach $168 billion in 2008-09 — the slowest pace since 2002-03.
 

Initially, the Ministry of Commerce had set an export target of $200 billion in financial year 2008-09, which was subsequently revised downwards to $175 billion in January this year. But the latest numbers reveal that India has missed even the revised target, too.
 

Imports declined by 34 per cent to $15.6 billion in the month under consideration, due to fall in commodity prices. However, for the fiscal ended March 2009, imports grew by 14.3 per cent to touch $287.76 billion.

“The reduced import bill is primarily due to a drop in commodity and oil prices,” said D K Joshi, economist with Crisil, a ratings and advisory firm.

India’s oil import bill stood at $3.8 billion in March, against $9.1 billion in the same month a year ago, a fall of 58 per cent. “Oil prices have fallen almost by a third from its peak. As oil demand is not elastic to prices, the import bill has reduced,” said Indranil Pan, chief economist with Mumbai-based Kotak Mahindra Bank.

With gas production from the KG gas basin coming on stream, Abheek Barua, economist with HDFC Bank, said oil imports would remain low in the “foreseeable future” as some importers would switch to domestically available natural gas.

With imports growing only by 14.5 per cent, the trade deficit, the difference between exports and imports, for the financial year gone by stood at $119.06 billion, against $88.5 billion in fiscal ended March 2008.

Had the imports grown at the average rate (more than 25 per cent) in the last three years up to March 2008, the trade deficit would have widened to a much higher level.

In March, the trade deficit stood at $4.05 billion, a rise of 36 per cent over the year ago month.

Sharp fall in non-oil imports: Non-oil imports, which are seen as an indictor of strength of domestic demand, also fell sharply by 19 per cent to $11.8 billion in March 2009. This, according to experts, point to continued weakness of domestic economy.

“The fall in non-oil imports in the fourth quarter of 2008-09, if concentrated in the areas of machinery, equipment and project goods, would entail slowdown in industrial production and that is a matter of deep concern,” said Harsh Pati Singhania, president, Federation of Indian Chambers of Commerce and Industry, in a press release.

On the growth outlook, A Sakthivel, president of Federation of Indian Export Organisations, an export promotion body, said, “We have passed through the worst phase and exports will pick up from July onwards. Further, the inventories of buyers in Europe will be over by August and European buyers have started visiting India and international trade fairs for procurement.”

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