Exports dip for seventh month, raising CAD worries

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fe Bureau: New Delhi, Dec 12 2012, 01:33 IST

Tags: A Sakthivel | Crisil | Standard & Poor | SR Rao

India’s exports declined an annual 4.17% in November — the seventh straight month of negative growth — while imports grew 6.35%, leaving a merchandise trade deficit of $19.28 billion. The trade deficit was only marginally down from the $20.96 billion recorded in the previous month, which was the worst in the last 17 years.

The steady contraction in exports coupled with the import bill — inflated to an extent by the weak rupee — even in a slowing economy has raised concerns about the current account deficit (CAD), which stood at a worrisome 4.3% of the GDP in 2011-12 and is officially forecast to be 3.5% in the current fiscal.

The steady fall in exports is likely to prompt the government to announce incentives by the weekend to boost shipments.

CAD occurs when a country’s total import of goods, services and transfers is greater than its total export of goods, services and transfers. The CAD stood at 3.9% in the first quarter of this fiscal, much lower than 4.5% in the previous quarter.

The Q2 CAD figure is expected later this month.

A few weeks ago, Crisil said a moderation in import growth could help CAD to be restricted at 3.1% in 2012-13, but a significant widening of the trade deficit since September has now raised fresh concerns on this front.

The demand slowdown in western markets led to India’s exports declining 4.17% in November to $ 22.3 billion while imports grew 6.35% to $41.5 billion.

Pertinently, Standard & Poor’s on Tuesday said the Indian government’s

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