Merchandise exports recovered a bit to post a growth of 2.2 per cent in July, compared to a huge contraction of 9.7 per cent in the previous month even as the outbound shipments of high foreign exchange earners such as refinery products, engineering goods and gems and jewellery fell.
Reflecting subdued economic conditions back home, imports continued to decline. In fact, the inbound shipments dropped at a faster rate of 10.43 per cent in July against 9.06 per cent in the previous month, official data released on Wednesday showed. Part of it is due to a 22 per cent decrease in imports of petroleum due to softening of prices and 42 per cent fall in those of gold.
A better way to look at the industrial situation in domestic economy is to look at non-oil non-gold imports. These also continued to chart a negative territory. Non-oil non-gold imports contracted 5.6 per cent against a fall of 9.3 per cent in the previous month.
The index of industrial production (IIP) rose just two per cent in June against 4.5 per cent in the previous month. Gauging from non-oil non-gold import data, IIP may remain subdued for July as well, though there is no one-to-one relation between the two data as trade numbers are in current prices and IIP is inflation adjusted. Also, the exchange rate plays a crucial part in the trade data.
Non-petroleum and non-gems and jewellery exports rose 5.3 per cent in July against a contraction of 4.9 per cent in the previous month. The trade deficit fell to a four-month low of $13.43 billion in July against $15.28 billion in June as exports rose and imports fell.
The trend, if continues, would have beneficial impact on the current account balance for the second quarter of FY20. The current account deficit narrowed to 0.7 per cent of gross domestic product (GDP) in the fourth quarter of FY19 against 2.7 per cent in the previous quarter. The data for the first quarter of FY20 is yet to come.
While exports of high value items declined in July, those of electronic goods and pharma rose. Gems and jewellery fell by 6.8 per cent, refinery products by 5 per cent and engineering goods by 1.7 per cent. Electronic items witnessed a whopping rise of 51 per cent, while pharma by 21.8 per cent.
Exports of employment-intensive leather and products saw a fall of 3.7 per cent. The cumulative exports rose 3.1 per cent at $181.5 billion in the first four months of the current financial year. Commerce Secretary Anup Wadhawan said on Wednesday in Kolkata that exports growth is likely to be in double digits in the current financial year despite the challenging situation both on the external and internal fronts, according to PTI.
Meanwhile, global conditions continue to remain grim. While industrial output in China grew at 17-year low pace in July, Germany is heading towards recession, reports suggest. Aditi Nayar, principal economist at ICRA, said, “In our view, merchandise exports are likely to record a low single-digit rise in FY20, given the current global growth environment.”
FIEO President Sharad Kumar Saraf said, “Depreciation of Chinese Yuan will not only help China reduce the impact of higher tariffs imposed by US, but will also make Chinese exports more competitive in a third country as well aggravating our problem.”
He said domestic issues including access to credit, cost of credit especially for merchant exporters, interest equalisation support to all agri exports.