Declining Exports Cause For Concern, Say Analysts

A drop in Indian exports for the second successive month in December and a widening of the trade deficit in the first nine months of fiscal 1997-98 (April-March) was a concern for the economy, analysts said on Wednesday.

Official data released earlier on Wednesday showed exports down by 5.13 per cent to $2.61 billion in December compared with December 1996.

If it continues it is definitely worrisome, Bidisha Ganguly, an economist at securities firm W I Carr.

Indian exports during the first nine months of 1997-98 rose just 3.31 per cent to $25 billion compared with the same period a year ago.

 

It is a major concern. If it goes on like this we wont have more than 5.0 per cent growth in exports this year, said Manashi Roy, deputy director general of Confederation of Indian Industry.

The commerce ministry said a drop in the value of the rupee against the dollar over recent months was one of the factors which led to a dip in the dollar value of Indian exports.

The differential exchange rate between December 1997 and December 1996 has also contributed to lower dollar growth in exports since the rupee depreciated by 9.44 percent in December, 1997 as compared to December, 1996, it said.

Imports, meantime, jumped by 11.91 per cent to $3.52 billion in December 1997. They were 7.40 per cent higher in April-December 1997 to $29.48 million compared with a year earlier.

Analysts said this rise in imports was a healthy sign as it signalled a turnaround in industrial growth.

The economy may be recovering which may be reason for imports picking up, Ganguly said. Non-oil imports in April-December 1997 grew by 15.02 per cent to $23.48 billion.

CIIs Roy said a closer look at disaggregated import data was needed before jumping to any conclusion of a revival in industrial growth.

Industrial output grew by just 5.0 per cent in April-November 1997 against 9.2 per cent in the same period in 1996.

The rise in imports have pushed up the trade deficit in April-December 1997 to $4.48 billion from $3.25 billion in April-December 1996.

If the trade deficit widens as a result of rising imports it will also put pressure on the rupee, said an economist with a foreign brokerage. The rupee has dropped by about eight per cent against the dollar from mid-August levels.

The Reserve Bank of India raised its bank rate by 2 per cent to 11 per cent on January 16 and followed it up with measures to tighten liquidity.