Merchandise exports shrank for a 13th straight month through December, contracting 14.8% from a year before despite a relatively favourable base, as poor demand and a crash in key commodity prices continue to weigh on the outbound shipments.
Goods imports, too, dropped 3.9% in December — compared with a 30.3% fall in November — having dropped consistently since December 2014 as well, according to the data released on Monday. An almost three-fold jump in gold imports drove up trade deficit in December to a four-month high of $11.7 billion.
Even on a quarterly basis, non-oil exports contracted 11.6% in the quarter through December, compared with a fall of 10% in the previous quarter and 6.8% in the first quarter of this fiscal, suggesting a turnaround is still far away.
Services exports also dropped 3.6% in November from a year before to just over $12 billion (It had risen 10% in October from a year earlier), although services imports fell at a sharper pace of 7.6% to $5.7 billion, according to the latest data. Analysts blamed fewer working days due to the Diwali and floods in Chennai in late November for the somewhat decline in such trade. Nevertheless, surplus in services trade touched a ten-month high in November.
Policymakers may also seek comfort in the fact that excluding oil and gold — two major commodities that have witnessed sharpest contraction in their prices — goods exports contracted just 2.1% in December. Even non-oil exports contracted 7.9% in December, while such imports rose 7.6% during the month, possibly suggesting a marginal pick-up in domestic consumption.
Commerce secretary Rita Teaotia said although merchandise exports are expected to drop for a third straight year in 2015-16, surplus in services exports will help prevent a worsening of overall trade deficit. Even chances of job losses are highly remote, as domestic consumption remains strong. However, the devaluation of the Chinese currency is expected to exert further pressure on Indian exports to that country, she admitted. China had accounted for 3.8% of total Indian goods exports in 2014-15.