The double-digit growth after six months of lower growth was driven by labour-intensive sectors like readymade garments and engineering goods as well as by exporters of petroleum products (mostly Reliance Industries, which exports from its Jamnagar plant).
Imports in May were 11.4% lower than a year ago, but the decline was almost entirely driven by the huge fall in gold imports. Imports, excluding oil and gold, grew 0.5% in May, bringing to an end a 10-month spell of negative growth in this category. Analysts said this signalled an incipient recovery in domestic demand.
At the same time, the trade deficit for the month was $11.2 billion, the highest since July 2013 when it was $12.2 billion.
On the cards to boost export growth are measures including easing of gold import curbs for the benefit of gems and jewellery sector (where the yellow metal is a key input), as well as removal of Minimum Alternate Tax (MAT) and Dividend Distribution Tax (DDT) on Special Economic Zones (SEZ), the commerce secretary Rajeev Kher indicated.
Also, the government will hold a bilateral meet with the US one of India's major trade partners and a traditional export market soon at the commerce secretary and commerce minister level to address all the outstanding issues, he added.
Given a possible monsoon deficit, Kher said the government was taking a 'nuanced' approach on agriculture exports. Agri exports, as far as possible, should be open, but clearly they are underlined by the attenuating factors of domestic demand and supply. He said the government was monitoring on a daily basis the price situation of milk, onion and pulses, and will take action if required, adding that, currently there is no concern on 'wheat and rice'.
On export growth, Kher said, It is definitely an encouraging sign... There is a positive spirit and if this trend continues the next month, then I will definitely be saying that there is a revival (in global demand). On exports target for 2014-15, he said, We are working towards $1 billion exports on a daily basis.
According to Crisil, Historical evidence suggests that global demand is a far more important factor than exchange rate in driving export growth. With advanced economies growth expected to pick up to 2.2% in 2014 from 1.3% in 2013, we expect faster growth in Indias exports this year, despite a marginal appreciation in the rupee in recent weeks.
Exports in May were $28 billion, up 12.4%, while imports shrunk 11.4% to $39.2 billion. Imports have been shrinking for a year now and mostly in double digits in percentage terms, reflecting the manufacturing slowdown. Oil imports during May grew just 2.5% year-on-year to $14.46 billion.
Easing of gold import restrictions is being considered not only to boost gems and jewellery exports, but also due to the current account deficit narrowing to 1.7% of the GDP in 2013-14 from 4.7% in the previous fiscal. The curbs were imposed due to high gold imports, in turn, increasing trade deficit and current account deficit. In May, gold imports shrunk 72% to $2.19 billion from $7.7 billion in May 2013. Gold imports restrictions hurt gems and jewellery shipments as it recorded a marginal 1.36% growth to $3.43 billion in May.
Some of the best performing export sectors in May include petroleum products (28.7% growth to $5.9 billion), engineering (22.09% to $6.1 billion), ready-made garments (24.94% to $1.49 billion), pharma (9.9% to $1.35 billion) and chemicals (13.8% to $1.09 billion).
The country had missed the export target of $325 billion last fiscal, as shipments rose just 3.98% to $312.35 billion due to a slowdown in manufacturing, exchange rate volatility, liquidity crunch and depreciating currency of some of India's trading partners. Exports were also hit due to a hike in global oil prices, regulatory problems faced by the drug industry in the developed markets and gold imports restrictions, coupled with its impact on gems and jewellery exports.
M Rafeeque Ahmed, president, Federation of Indian Export Organisations, had said the target of new Foreign Trade Policy (2014-19) should be to increase exports to $750 billion by 2019 by giving a major thrust to manufacturing, services exports, e-commerce, hi-tech products and branded exports through effective coordination with states. Exports should be brought under priority sector lending for credit availability, he added.