Export growth slows

Merchandise exports rose at their slowest pace in July, triggering concerns of yet another phase of demand slump. During the month, exports grew by 13.2 per cent to $16.24 billion, compared to $13.62 billion in the month last year.

Export growth had been slowing gradually each month since the beginning of the financial year. In April, May, June and July, the pace of growth in exports had been 36.2 per cent, 35 per cent, 30.4 per cent and 13.2 per cent, respectively.

During the month, imports jumped by 34.3 per cent to $29.17 billion, compared to $19.62 in the month last year, resulting in a trade deficit of $13 billion — the highest in the last 22 months. Trade deficit in the first four months of the financial year reached $43.6 billion.

“With the growth in imports continuing to overwhelm the growth in export receipts, on the back of a strong domestic demand, similarly sized foreign trade deficits will be recorded in the coming months,” said Matt Robinson, senior economist, Moody’s Analytics, in a note.

Earlier this week, India recorded a growth rate of 8.8 per cent in the first quarter of this financial year, reflecting a rise in industrial activity and growth in demand. According to Moody’s report, business conditions are improving and buoyant household sentiment is encouraging expenditure, with inbound shipments of capital items and consumption goods expanding rapidly.

The report, however, also noted that a gloomy picture of the recovery was emerging from the US, and Europe might affect India’s shipments. Last month, Commerce Secretary Rahul Khullar had also cautioned of an imminent slowdown in demand for Indian goods abroad.

In an effort to boost the exports in some of the sectors, the government sought to offer more incentives to the country’s exporters, especially those that employ large amount of people. A package of around '1,050 crore was announced by Commerce and Industry Minister Anand Sharma in the review of the Foreign Trade Policy on August 23. The government would conduct another review of exports in November after which it will take a call on whether to continue with the stimulus measures or gradually withdrawing them.

During the month, oil imports rose 4.4 per cent to $7.66 billion from $7.34 billion in the same month last year, while non-oil imports grew by 49.6 per cent to $21.5 billion from $14.37 billion in July last year. Total exports during the April-July period reached $68.6 billion, up 30.1 per cent on a yearly basis. Cumulative imports, on the other hand, grew by 33.3 per cent to $112.2 billion, with a growth in the demand for gold, machinery, iron and steel, chemicals, petroleum products and gems and jewellery, among other things.