All eyes will be on India’s merchandise exports, the government figures for which might be released later today. Exports had fallen for the 14th consecutive month in January, this year. As compared to this, during the 2008-09 global financial meltdown, the decline was for nine months in a row.
Union Finance Minister Arun Jaitley ruled out the possibilities of undervaluing the currency to overcome poor export performance recently. However, the rate of fall of exports have showed signs of moderating in recent months. While there had been a contraction of 13.60% in January, the corresponding figure for the previous month was more than 15%. Growth had last been recorded in November, 2014 with a rise of 7.27% cent year-on-year.
“We expect February data also to reflect a decline. Trade performance of other global economies is also in the negative zone. Recent being – China, as it registered 25% decline for February. The only concern now is that if the decline goes further deep then overall exports for the financial year will slip below $260 bn, which will be a serious concern,” said Ajay Sahai DG and CEO of apex exporters body FIEO.
Exporters have till now believed India will manage around $260 bn worth of exports in the current financial year, of which around $219 bn has been realised so far. The government had earlier set a $300 bn export target but Commerce Secretary Rita Teaotia has said in recent months that such a target needed to be revised downwards.
Releasing the January data, commerce ministry had said: "The trend of falling exports is in tandem with other major world economies. The growth in exports have fallen for USA (-10.51%), European Union (-9.48%) and China (-7.01%) for November 2015 over the corresponding period previous year as per WTO statistics.”
Besides a global slowdown in spending, the severe fall is attributed to a decline in global commodity prices.
However, the economic survey has signalled exports will pick up from the next financial year. The survey also said the continuance of low commodity prices globally augurs well for sustaining low trade and current account deficit. “As such, while export slowdown may continue for a while before picking up in the next financial year,” it added.
The recent bout of uncertainty owes to developments and concerns about China's growth, financial markets and currency, it said, adding that the spillovers are causing shocks in vulnerable economies. February trade data for China represented its largest monthly drop in exports since the financial crisis. The customs administration said exports in February fell 25.4% in dollar terms year-over-year, compared with a drop of 11.2% in January.
Chief Economic Adviser (CEA) Arvind Subramanian said last week that rapid boost to export was imperative for the desired economic growth of 8-10%. Some have said the CEA's comments are a veiled reply to the government which had consistently underplayed export contraction, emphasizing more on domestic manufacturing and consumption.
India's merchandise imports have also fallen progressively. The latest decline in January showed a 11.01% decline. Gold imports rose by 85.16% to $2.91 bn up from $1.57 bn a year ago. But a fall in global crude prices have cut down on Indian's ballooning oil import bill. The import of crude oil - $5.02 bn according to January figures, forms a significant portion of the country's total import, which was $28.71 bn for the same month.
As a result, the trade deficit has kept on narrowing for the entire period and was pegged at $106 bn for the months leading upto January in the current financial year. The corresponding figure for the previous year was more than $119 bn.
Non-oil, non-gold imports, the most efficient barometer of levels of economic activity, fell 7.43 per cent in January. This was much more than the two per cent registered in the previous month of December casting doubts on the recovery of industrial production from contraction.
Coming back to exports, top exporting sectors including engineering, petroleum products, gems and jewellery, textiles, chemicals and agriculture were not showing healthy growth rate. Seventeen of the 30 export sectors recorded a negative growth in January.These included major sectors such as engineering goods (-27.6% to $4.98 bn), ready-made garments (-6.1% to $1.4 bn) and petroleum products (-35.1% to $1.9 bn). Non-petroleum exports in January 2016 fell 10.55% to $19.1 bn.
The fall in engineering exports by over 27 per cent for January will have a cascading negative impact on job creation as well. Since, the sector is dominated by SMEs with large employment, said the EEPC India Chairman T S Bhasin.