Global demand & weak rupee drive 11.15% export growth in Sep

Imports and trade gap at the lowest in 30 months; govt may get CAD relief

Pushed by a weak local currency and a recovery in global demand, India’s merchandise exports, compared with the same month last year, rose 11.15 per cent in September — the third straight month of double-digit growth rate — to stand at a six-month high of $27.68 billion. The country’s total imports, on the other hand, fell 18.10 per cent to a 30-month low of $34.43 billion, as the government compressed inbound shipments of precious metals and non-essential products.

As a result, the country’s trade deficit fell to $6.76 billion, the lowest level in two-and-a-half years. The trend seen during the past three months is that of imports shrinking gradually and exports increasingly growing at higher rates. This puts less pressure on the country’s current account deficit (CAD) and might provide some relief to the government, which has been struggling to contain its CAD (4.9 per cent of GDP in the first quarter of this financial year).

According to official figures, released on Wednesday, in the first six months of the financial year, exports rose 5.14 per cent to $152.10 billion, from $144.67 billion in the same period last year. Enthused by this, Commerce Secretary S R Rao said the annual export target of $325 billion for 2013-14, against $300 billion the previous year, would be met. He added the Federation of Indian Export Organisations (FIEO) was optimistic outbound shipments might even reach $350 billion this year.

In the previous two months, exports had risen 13 per cent and 11.64 per cent in August and July, respectively. Earlier, these had contracted for two straight months after inching up 1.68 per cent in April.

India’s imports in the first half of this financial year fell marginally, by 1.8 per cent, to $23.22 billion. For this decline, the government’s measures to tighten imports of precious metals and non-essential items were seen as a key reason.

The overall trade deficit in the April-September period fell 14.6 per cent to $80.13 billion, from $91.82 billion in the corresponding period the previous year.

Rao refused to estimate the trade deficit figures for the full financial year. But a YES Bank analysis projected it would fall to $179 billion in 2013-14, from $196 billion the previous year.

The widening trade deficit had broadened current account deficit to $88 billion, or 4.8 per cent of GDP, in 2012-13. This year, the government expects CAD to come down to $70 billion, or 3.7 per cent of GDP. YES Bank’s projection of $60 billion CAD for 2013-14 might give it some comfort.

CARE Ratings said if trend persisted, trade deficit in the current financial year could be $10-20 billion lower than last year’s $190 billion. This might prove useful in containing CAD, it said.

In August, the finance ministry had raised import duty on gold by two percentage points to 10 per cent, while it had also raised duties on the inbound shipments of platinum, silver and flat-screen TVs.

The measures seemed to yield results in September, with gold & silver imports declining 82 per cent to $0.8 billion (from $4.6 billion in September last year). For the first six months, imports of these precious metals rose 8.71 per cent to $23.1 billion, against $21.2 billion a year ago.

The fall in precious metal imports also brought down the overall imports of non-oil product imports — 24.19 per cent from September last year to $21.24 billion in the month this year.

For the first six months of the financial year, these imports contracted 4.55 per cent to $149.35 billion, from $156.48 billion in the same period the previous financial year.

Also, in September, a fall was seen in oil imports, too — due to a softening of global crude oil prices. Compared to the same month last year, these were down almost six per cent, to $13.19 billion. In the April-September period, however, oil imports rose 3.58 per cent to $82.88 billion, against $80.01 billion in the same period a year ago.