Although at a three-month high, exports rose barely 3.74 per cent in January as major foreign exchange earners such as engineering goods and refinery products either registered subdued growth or contraction in their outbound shipments.
This is because of a slowdown in global growth, which has been hit by a trade war between the two economic giants — US and China.
Exports have remained lacklustre in the previous two months as well — growing by 0.80 per cent in November and 0.30 per cent in December.
The muted growth could be gauged from the fact that exports had increased by over 17 per cent in October. Exports rose 9.52 per cent in the first nine months of the current financial year to $271.8 billion. Though there was no official target, government officials were hopeful of hitting the $350-billion mark this financial year. That looks impossible now but last year’s figure of $303.5 billion could be surpassed.
Likewise, imports also remained almost flat, growing by just 0.01 per cent in January. The only solace here was that inbound shipments had slightly recovered from a decline of 2.44 per cent in December. As such, trade deficit rose to $14.73 billion in January from $13.08 billion in December, which was the lowest in the current financial year so far. However, it was lower than November’s figure — $16.67 billion.
“Spin off effect due to a global tariff war has continuously been impacting the country’s trade, both imports and exports,” said Federation of Indian Export Organisations (FIEO) president Ganesh Kumar Gupta.
He urged the government to tap opportunities created by the trade war by getting credit flow augmented, increasing tax deduction for R&D and raising budgetary support for marketing and export infrastructure.
Declining oil prices helped India save foreign exchange through decline in imports, but it also marred the chances of earning the very same dollars through exports.
In fact, the latter was much more affected by softening oil prices. Exports of refined products declined 19 per cent, while import of crude and related products declined 3.59 per cent. If we take away petroleum products, imports in fact rose 1.43 per cent in January.
Gold imports rose by whopping 38.16 per cent in the month. Non-oil non-gold imports contracted 0.76 per cent in January against a decline of nearly two per cent in December. These had fallen five per cent in November. This implied that domestic demand for imported goods is on a downward swing and this may have repercussions for industrial growth.
The index of industrial production (IIP) struggled to rise to 2.4 per cent in December from 0.3 per cent in November. This was the second month in a row that the factory production expansion was below 5 per cent. Similarly, non-petroleum and non gems and jewellery exports rose 8.17 per cent in January.
As many as 22 out of the 30 major product groups saw a rise in exports in January. However, many saw just marginal growth. For instance, engineering goods, which earned one-fourth of foreign exchange through exports, rose just 1.07 per cent.
However, drugs and pharmaceuticals saw 15.2 per cent rise in exports, while organic and inorganic chemicals grew 15.56 per cent.
Besides petroleum, transport equipment, pearls, precious and semi-precious stones as well as vegetable oils saw huge decline in imports by 21.43 per cent, 36.51 per cent and 19.8 per cent, respectively.