Merchandise exports up after 18 months in June

Exports rose 1.3 per cent to $22.57 bn, against $22.28 bn in the corresponding month a year ago

Merchandise exports rose in June after 18 months of decline, the longest fall in recent times. Exports rose 1.3 per cent to $22.57 billion, against $22.28 bn in the same month a year before, government data showed on Friday.

As many as 24 items, including engineering, electronic goods, drugs & pharmaceuticals and carpets & handicrafts, of 30 major ones tracked by the commerce minsitry showed growth; 13 had done so in May. However, petroleum, gems & jewellery and apparel exports continued to show a decline in June.

In May, exports had contracted by 0.8 per cent, to $22.17 bn, the rate of fall steadily decreasing for the past six months, barring April, when it spiked to 6.7 per cent. This had made economists forecast a rebound in June exports.

The marginal export rise should also be seen in the context of the gloom in international markets. Chinese exports declined 4.8 per cent in June. The World Trade Organization had in April slashed its projection for global trade growth to 2.8 per cent in 2016, from the previous forecast of 3.9 per cent.

Cumulative exports for these first three months (April to June) of the 2016-2017 financial year are $65.31 bn, a contraction of 2.1 per cent from the $66.69 bn for the comparable period in 2015-16. Pulled down by petroleum and gold, imports declined by 7.3 per cent to $30.66 bn in June as compared to the year-before period, when it was $33.11 bn. So, the trade deficit was $8.1 bn in the month, slightly up from the $6.3 bn in May.

The structure of imports showed large-scale domestic industrial recovery would take time. The Index of Industrial Production turned slightly upwards by 1.2 per cent in May, against a contraction of 1.3 per cent in April. Non-oil, non-gold import, broadly taken as an indicator of industrial demand, declined 1.1 per cent to $22.22 bn in June from $22.47 bn a year before. However, the rate of decline in June was lower than the 3.5 per cent to $21.37 bn in May. Import of crude declined 16.4 per cent to $7.5 bn in June. The fall was as much as 30 per cent in May. Gold imports continued to fall by a large margin for a fifth month, going down 38.5 per cent to $1.2 bn as compared to the $1.96 bn a year before. The fall had been as much as 60.5 per cent in April.

Cumulative imports in the first three months (April-June) of 2016-17 reached $84.54 bn as compared to $98.91 bn the previous year. So, the cumulative trade deficit for the first quarter of 2016-17 was $19.23 bn, a fall  of 67.5 per cent over the $32.22 bn in the corresponding period of the previous financial year.

“The collapse in gold imports, continuing benefit from a lower oil import bill, coupled with the nascent turnaround in exports, suggest a high likelihood of a mild current account surplus in the first quarter, even if remittances moderate further,” felt Aditi Nayar of ICRA Ratings.

Export of engineering goods, which had made a comeback in May after remaining depressed for months, continued to rise in June. After the May rise of 2.2 per cent, it rose a marginal 0.9 per cent. However, the sector requires further support for improving of competitiveness in a difficult global market, said T S Bhasin, head of the Engineering Export Promotion Council.

Also, the fall in drugs and pharmaceutical exports was arrested, though up only 0.07 per cent at $1.41 bn, after the 14.2 per cent fall in May. And, electronic goods rose almost 10 per cent in June, to  $522 million.