India’s exports contracted 33.2% in April 2009, over the same month last year. This almost mirrors the performance in March, which shrunk 33.3%–the worst in 14 years. Exports dropped for the seventh month in a row to $10.74 billion in April 2009 from $16.08 billion in April 2008.
The slowdown in the domestic economy and lower oil prices in April resulted in imports falling at a faster pace than exports. Imports contracted by 36.6% to $15.75 billion in April 2009 over the same period last year, with oil imports falling by as much as 58% to $3.63 billion. Worryingly, non-oil imports?a proxy for Indian companies? overseas purchases?fell by 24.6% to $12.11 billion.
This resulted in a narrow trade deficit of $5 billion in April, against $8.7 billion in April last year, and substantially lower than the peak of $13 billion in August 2008.
The trade deficit measures the excess of imports over exports.
?This decline will continue until September and we hope that thereafter, we would see a consolidation and improvement in exports,? said commerce secretary GK Pillai on Monday. After an impressive growth rate of over 30% in the first six months of 2008-09, exports started contracting since October, the year ending with a gain of a mere 3.4%.
Pillai said India?s exports in 2009-10 would remain in the $170-billion range. ?(With) rising oil product prices, the trade deficit for the current fiscal would remain at $100 billion compared with last year’s $120 billion,? he said.
The Federation of Indian Export Organisations said inventories with foreign buyers were depleting and exporters have started receiving orders. ?Demand for low-price articles is increasing, but there are still constraints in the middle- and high-class segments,? said FIEO director-general Ajay Sahai.
Even though exports are contracting, relatively robust domestic demand is driving growth, Goldman Sachs said, projecting investment demand to pick up from July.