Record exports in July fail to allay slowdown fears
Merchandise exports rose by a record 82 per cent in July to $29.3 billion from $16.1 billion in the same month last year, mainly due to a rise in the demand for engineering and electronic goods and gems and jewellery. The July imports also soared—by 51.5 per cent to $40.4 billion against $26.7 billion in the same period last year.
Experts attribute this high growth in the month's exports to a rise in consumption and newer areas such as engineering exports that continue to show healthy growth. Even so, they sense a major slowdown in the making.
Anis Chakravarty of Deloitte Haskins & Sells concedes that merchandise trade grew at faster than expected rates in the first quarter, but says such numbers are not sustainable. “The export numbers decreased during the second quarter of the past fiscal and is likely to do so in the current fiscal as well. The US downgrade is likely to also have an impact on the trade numbers,” says the director of the consulting firm.
Commerce Secretary Rahul Khullar echoes Chakravarty’s views and says this high growth rate is not sustainable and the moderation will be seen from August-September. “Exporters should be prepared for a slowdown,” he notes. “It will be a matter of luck if exports register a growth rate of 20-25 per cent per month.”
The Federation of Indian Exports Organizations also indicates a slowdown, owing to a hike in rates, discontinuation of the the Duty Entitlement Passbook Scheme and withdrawal of other incentives. Besides, global economic growth is gloomy in the US and Europe, which are reeling under a sovereign debt crisis, job losses and demand slowdown.
As for oil, its July imports rose to $11.4 billion, up 37 per cent over $8.3 billion in the same period last year. Non-oil imports grew by 58.1 per cent to $29 billion from $18.3 billion in July 2010, according to data released by the ministry of commerce and industry.
KASSA says this trade data points towards a higher consumption pattern of the Indian economy. “This,” notes its director, Siddharth Shankar, “to my mind is not suitable in the long run. While the export figures have shown a robust growth, we need to be sure about the inclusion & exclusion of data that would truly represent the export figures of India.” He says he expects exports to go down in dollar terms even as imports remain at the current level. “This would imply the trade deficit would go up. The only good factor I see in the coming months is the probability of the rupee weakening by about two to three per cent; it would offset the slower growth in exports.”