Indian exports grow 10.22 pct to $26.4 bn in June; gold imports drive trade deficit up

Written by Agencies | New Delhi | Updated: Jul 16 2014, 23:46pm hrs
India ExportsIndia's exports registered 10.22 per cent growth to $26.4 billion in June.
India's exports growth remained in double digit for the second month in a row in June at 10.22 per cent but spurt in gold imports marginally pushed the trade deficit to USD 11.76 billion.

Sectors that helped in pushing exports in June include textiles (14.39 per cent), petroleum products (38.3 per cent), engineering (21.57 per cent), leather (15 per cent), marine products (27.49 per cent), oil seeds (44.4 per cent) and tobacco (31 per cent).

Exports in June stood at USD 26.47 billion as compared to USD 24.02 billion in the same month last year.

According to exporters body Fieo, outbound shipments have registered double digit growth on account of improvement in the global demand.

"Demand is improving in advanced as well as in emerging markets. The figure is encouraging and we expect it to continue. This fiscal exports will be better than the previous fiscal," Fieo President Rafeeq Ahmed said.

Cumulatively, in the April-June period too, exports grew by 9.31 per cent to USD 80.11 billion.

However, the growth in exports during the month under review was low as compared to May when it recorded a growth of 12.4 per cent. Trade deficit too was marginally higher in June as against USD 11.23 billion in May and USD 11.28 billion in June 2013.

After registering a negative growth since October last year, gold imports in June jumped 65.13 per cent to USD 3.12 billion from USD 1.88 billion during the same month last year.

In October 2013, gold imports stood at USD 1.3 billion, registering a growth of 62.5 per cent.

Imports in June too increased by 8.33 per cent year-on-year to USD 38.24 billion, according to the Commerce Ministry data.

The weak rupee is also expected to have a positive impact on exports. The rupee depreciated by 15 paise to 60.27 against the US dollar in early trade today.

Further growth likely on global demand, budget push: Exporters

Buoyed by the double digit growth in outbound shipments in June, exporters today said the momentum was likely to continue in the coming months on the back of higher demand helped by an uptick in global economies and measures announced in the Union Budget.

"The continuance of the double digit growth in exports is a very positive sign. With encouraging index of industrial production (IIP) numbers for May, I expect a further improved performance in months to come," Federation of Indian Exports Organisations (FIEO) President M Rafeeque Ahmed said.

Ahmed said the global situation is conducive to exports as both advanced and emerging economies are showing better economic indicators.

The budgetary announcements, including extension of 24x7 facility for all export promotion schemes, institutionalisation of Export Promotion Mission and greater involvement of the states will further facilitate exports besides reducing transaction cost and time, he said.

India's exports growth remained in double digit for the second month in a row in June at 10.22 per cent but spurt in gold imports marginally pushed up the trade deficit to USD 11.76 billion.

"While the rise of over 9 per cent in cumulative exports during the first quarter of 2013-14 reflects a steady improvement in global demand, we need to stay vigilant on trade deficit that has shot up to an 11-month high," Ficci President Sidharth Birla said.

However, credit rating agency ICRA said the growth in outbound shipments could moderate in the near future, while weak monsoon may prove to be a dampener by pulling down agricultural exports.

"Export growth is expected to be moderate in the coming months, reflecting external demand conditions, a waning of the favourable base effect and relative stability in the nominal exchange rate. The unfavourable monsoon conditions suggest agricultural exports would be muted in FY15," said Aditi Nayar, Senior Economist at ICRA Ltd.

Sectors that helped in pushing exports in June include textiles (14.39 per cent), petroleum products (38.3 per cent), engineering (21.57 per cent), leather (15 per cent), marine products (27.49 per cent), oil seeds (44.4 per cent) and tobacco (31 per cent).

Engineering exporters' body EEPC India Chairman Anupam Shah attributed the rise in exports of engineering goods to uptick in the US economy.

"While engineering, petroleum goods and others have bounced back, the agri exports and shipments of electronics goods are causing concern requiring immediate support from the government," Assocham Secretary General D S Rawat said.

Exports in June stood at USD 26.47 billion as compared to USD 24.02 billion in the same month last year.

The FIEO said that the flow of credit to the exports sector which is still not adequate, needs to be augmented, so that new and small entrepreneurs are not deprived of opportunities.

"The import growth in non-crude oil imports by 7 per cent is a good sign, when seen against the background of the recent growth in manufacturing. The new Foreign Trade Policy 2014-19 should attempt to integrate India with the global value chain and focus on high tech exports, electronic hardware, branded exports, project exports, services exports besides, traditional sectors which have a high employment ratio," FIEO President M Rafeeque Ahmed said.

He said that the country should look for an export of USD 750 billion by 2018-19 which might look challenging but could be achieved with integrated efforts of all stakeholders.

Surging gold imports drive up India's June trade deficit to 11-month high

(Reuters) A surge in gold imports in June widened India's trade deficit to an 11-month high, adding to the uncertainty from global oil prices that could pile more pressure on its current account balance.

The trade deficit jumped to $11.76 billion last month from $11.23 billion in May, government data showed on Wednesday, boosted by a 65 percent annual rise in gold imports.

The bullion is India's second-biggest import item after oil and was one of the principal factors in putting it on the brink of a full-scale balance of payments crisis last year.

In a desperate bid to trim a gaping current account deficit, India last year increased import duties on gold and imposed a rule that required a fifth of all bullion imports be re-exported.

Those measures had crimped supply and pushed up premiums in the domestic market, sparking a rise in smuggling. However, a strong rebound in gold imports will likely mean the curbs stay in place for some time.

"The industry has been demanding for removal of curbs on gold imports but a high trade deficit in the backdrop of geo-political tension could make the government a little more wary," said Radhika Rao, an economist at DBS Bank in Singapore.

Finance Minister Arun Jaitley surprised bullion markets by keeping the import duty on gold and silver unchanged at 10 percent in his maiden budget last week.

Merchandise exports grew for a third straight month in June, helped by a pick-up in external demand and a weak currency, bolstering the outlook for an economy that is battling the longest sub-par growth in more than a quarter of a century.

Exports in June rose 10.22 percent from a year earlier to $26.48 billion, a slower pace than May but underlining a turnaround since March on improving global growth.

The data comes on the heels of a sharp drop in inflation and a strong rebound in industrial production, offering some cheer to Prime Minister Narendra Modi who swept to power in May on a promise to revive Asia's third-largest economy.

"The (trade) data shows a slow recovery in business confidence," said Rao.

Economic growth has been stuck below 5 percent for the past two years, weighed down by weak investments, tepid domestic and external demand, and high inflation and interest rates.

Concerns about global crude oil prices from unrest in the Middle East, however, remain a risk. A spike in crude prices will push up India's import bill and swell the trade shortfall, since the country imports nearly 80 percent of its oil.

Oil imports picked up in June, rising 10.9 percent on year to $13.34 billion from an annual increase of 2.5 percent a month ago.

HIGHLIGHTS

* Trade deficit $11.76 bln in June vs $11.23 bln in May

* Oil imports up 10.9 pct y/y vs 2.5 pct y/y rise in May

* Gold imports up 65 pct y/y in June; merchandise exports up 10.22 pct y/y