With contraction in all but six of the 30 major commodities, India’s merchandise exports have fallen a steep 21% annually to $21.3 billion in August, sustaining the shipments in negative territory for a long nine months, reports fe Bureau in New Delhi. This has prompted leading exporters to seek immediate intervention by the Prime Minister to salvage the situation. Subdued prices of inputs — industrial and agricultural — have hit headline export figures (the realisations might not be as bad).
But the fact that none except the US among major export markets are performing or tend to look up in the near future is indeed worrisome, exporters said, seeking a reversal of policies that makes inputs costlier (like the latest 20% safeguard duty on some major steel items) and more incentives for the sector.
Non-oil exports, accorded greater importance by economists given that India is a net importer of oil despite the recent years’ strides in export of petroleum products due mainly to Reliance Industries, fell to fresh depths as well.
Since January this year, these exports have been in the negative zone and the steepest fall of 13.9% was witnessed in August. In April-August, non-oil exports fell by 7.47%.
While this underscored the waning competitiveness of India’s exporters in global markets undermined by tepid demand, the continued contraction in imports — for the ninth month in a row, imports shrank on an annual basis, with a near-10% fall in August to $33.7 billion — indicated that domestic investments and consumption have yet to pick up strongly. A sliver lining was that non-oil imports have risen 7% in August, the steepest growth in the last four months. Gold imports increased 140% to $4.95 billion in August from the corresponding month a year ago, presumably because a fall in prices of the metal boosted demand.
Exports have traditionally been an under-performer relative to the size of the Indian economy. While the foreign trade in goods have been in deficit in recent history, the surge in services exports due mainly to the IT sector made the country slightly surplus in overall foreign trade. But, for the last few quarters, net overall exports has been in the negative.
Giving relief to the managers of the country’s balance of payments, the overall merchandise trade deficit in April-August this year stood at $57.5 billion, lower than $58.2 billion in the year-ago period. The deficit, however, widened to $12.5 billion in August from $10.8 billion a year earlier.
Thanks to low crude prices, oil imports, which make a third of the country’s total imports, dropped about 43% in August.
The main sectors that reported declines in exports include petroleum products (48%), engineering goods (29%), leather (12.8%), marine products (20.8%) and carpets (22%). Export of all items other than tea, coffee, ceramics, pharmaceuticals and gems and jewellery declined in the month. Federation of Indian Export Organisations president SC Ralhan said : “The main reason for decline in engineering goods seems to be the increase in the duty on steel products without corresponding increase in drawback rate which has compelled many small exporters to opt out of contract.” He also urged the government to reintroduce the 3% interest subvention for exporters.