Exports rise 13.2% in July, trade deficit widens

The country’s exports rose 13.2 per cent last month to $16.24 billion, compared to $13.62 billion in July last year, but lower than $19 billion in July 2008. Imports, meanwhile, jumped 34.3 per cent to $29.17 billion in July, compared to $19.62 billion in 2009-10.

The trade deficit, or difference in exports and imports, inched towards $13 billion in July, the highest in the last 22 months, from $10.6 billion in the same month last year. Trade deficit in the first four months (April-July) of the current financial year reached $43.6 billion.

According to Nomura, financing the trade deficit will not be a major concern due to robust net capital inflows.

“We are still below the pre-crisis level. To think things are back to normal is not a constructive way to look at the numbers, we should be very circumspect about the numbers. Basically what is happening right now is that the base effect is wiped out. Things are not back to normal yet. The heady days of 25-30 per cent are over,” Khullar said, while releasing the initial estimates for July.

The official foreign trade data will be released on September 1.

Total exports during April-July reached $68.6 billion, up 30.1 per cent year-on-year. Cumulative imports, on the other hand, grew by 33.3 per cent to $112.2 billion with a rise in the demand for gold, machinery, iron and steel, chemicals, petroleum products and gems and jewellery, among others.

WIDENING GAP
	JULY 2008	JULY 2009	JULY 2010
EXPORT	19.00	13.62	16.24
IMPORT	31.18	19.62	29.17
TRADE DEFICIT	12.18	6.00	12.93
*Value in billion dollars Source: Ministry of Commerce and Industry

However, Khullar also said the second half of the current financial year would see a slump in the demand for goods as recovery in the developed countries like the US and EU members has failed to gain momentum. “Things are not going to be as fast in the second half of the year as it was in the first half. Globally, developed countries are now pushing to promote their exports in the developing countries. Also, second half of the year will be a period when we will see calibrated withdrawal of the stimulus with aggregate demand taking a hit.” He, however, said the country would achieve the set target of $200 billion worth of exports by 2010-2011.

“Some amount of downward risk is going to emerge in the country’s export growth by the second half of this financial year and the risk is real. Bigger risk is its impact on the current account deficit,” said Deepali Bhargava, chief economist, ING Vysya Bank.