Exports got off to a terrible start in the new fiscal with shipments contracting in April for the fifth consecutive month as the rupee remained volatile against major currencies such as euro, pound sterling and Yen and weak demand overseas. Shipments in April shrank 14% y-o-y to $22 billion as major items such as petroleum products and gems and jewellery showed negative growth while engineering items registered a near flat growth.
Exports had contracted 21% in March, a 67-month low growth.
With imports, too, shrinking 7.5% to $33 billion, trade deficit in April was $11 billion, marginally down from $11.79 billion in March, the highest since November 2014.
SC Ralhan, Federation of Indian Export Organisations (FIEO) president, said the prime reason for fall in exports continues to be a softening of crude, metal and commodity prices. Petroleum export fell 46.5% to $2.75 billion, which is responsible for an overall decline of 9% as the sector used to contribute to 20% of country’s exports, he said.
Decline in exports of rice, marine products, meat, dairy and poultry products, leather and leather products are of equal consequence as these sectors have shown great promise in the past, Ralhan added. Equally worrying is the negative growth in gems and jewellery (of 10% to $2.9 billion), electronics (-12% too $473 million) and plastic goods as domestic capabilities are being augmented in these sectors. Exports to countries dependent on oil, metal and commodities exports may have taken a hit as they reduced their appetite for imports with tighter capital control, Ralhan said. Exporters have demanded immediate reintroduction of the Interest Subvention Scheme.
Imports in April contracted due to a fall in petroleum and crude oil products (thanks to the low oil prices). However, gold imports came down from $4.98 billion in March to $3.1 billion in April (though it was up 78.3% against imports in April last year). March saw a higher level of gold imports, thanks to demand ahead of Akshaya Tritiya and the recent abolishment of the 80:20 rule.
In April, machinery, electrical and non-electrical imports rose 10.1% (to $2.4 billion), while transport equipment imports rose 69.4% to $1.46 billion. Electronic goods imports rose 30% to $3.3 billion in the month. Oil imports in April shrunk 42.65% to $7.4 billion (but was near flat against $7.41 billion in the previous month), while non-oil non-gold imports (these included capital goods) during the month was at $22.47 billion (as against $23.35 billion month-on-month).
FE had reported on May 6 that even as India’s merchandise exports have contracted in value terms since December 2014, a survey by the apex exporter body had clearly indicated that shipments would decline in volume terms in the coming months. Up to 75% of the 410 exporting companies that took part in the FIEO study showed orders from importers in hand in April 2015 were less than that in the same month a year ago. The decline was in the range of 18-80%, or around 35% on average.
Imports in March had contracted 13.44%. Cumulatively, exports for the last fiscal shrunk by 1.23% to $310.5 billion ($30 billion short of the $340 billion target). Barring textiles, most major items including petroleum products, engineering goods, gems and jewellery, chemicals and pharma contracted in March due to weak demand overseas. The government had in its foreign trade policy set an ambitious $900 billion export target (for merchandise and services exports) by 2020.