No recovery yet! Exports drop 0.34% in November, reflect economic gloom

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Published: December 14, 2019 5:49:40 AM

A 3.7% year-on-year fall in brent crude oil prices has contributed to a drop in both exports and imports of petroleum.With this, overall goods exports in the April-November period contracted 2% to $211.9 billion, while imports shrank 8.9% to $318.8 billion.

Export, import, economic gloom, economic growth, economy newsInterestingly, gold imports rose 6.6% in November after months of fall, likely reflecting a slow return to demand due to the marriage season.

Merchandise exports shrank 0.34% year-on-year in November to $26 billion —the fifth contraction in the past eight months — despite a relatively favourable base, as faltering domestic manufacturing on top of external headwinds continue to bite.

The commerce ministry data on Friday showed imports, too, dropped for a sixth straight month through November — by 12.7% against a fall of 16.3% in October — mirroring a collapse in domestic demand. Still, goods trade deficit shot up to $12.1 billion in November against $11 billion a year ago, as the contraction in imports narrowed month-on-month.

Although the contraction in exports was less broad-based in November, still as many as 17 of the 30 key segments witnessed a decline.
The decline in goods trade is the latest in a series of crucial indicators — industrial output shrank 3.8% in October; retail inflation hit a 40-month high and non-food credit growth is hovering around a two-year low — that reinforced fears of a protracted slowdown of the economy, especially after growth hit an over six-year low of 4.5% in the September quarter.

However, policy-makers can seek some comfort from the fact that core exports (non-oil and non-gems and jewellery) rose 4.8% in November that helped reverse a slide in such shipments until October this fiscal. However, the persistent contraction in non-oil and non-bullion imports (12% in November and 7.4% in in the April-November period) reinforced fears of an acute domestic consumption slowdown.

Interestingly, gold imports rose 6.6% in November after months of fall, likely reflecting a slow return to demand due to the marriage season.

However, thanks to the persistent import contraction, trade deficit in the first two months of the third quarter (October-November) has averaged just $11.6 billion, against $14 billion in the previous six months. This will ease pressure on the country’s current account balance, deficit in which had worsened sequentially to 2% of GDP in the June quarter from 0.7% in the January-March period, although it was still better than 2.3% in the first quarter of FY19.

A 3.7% year-on-year fall in brent crude oil prices has contributed to a drop in both exports and imports of petroleum.With this, overall goods exports in the April-November period contracted 2% to $211.9 billion, while imports shrank 8.9% to $318.8 billion.

Also, services exports grew just 5.3% in October, at a much lower pace than 10.4% rise witnessed in August, to $17.7 billion, although imports rose at a shaper rate of 7.6% to $10.9 billion, showed the latest data. Having grown at 9% in FY19, India’s merchandise export has fallen this fiscal. Citing persistent risks from a global trade war, the World Trade Organization (WTO) recently cut its global trade growth forecast for this year to the weakest level in a decade. The volume of merchandise trade, the WTO said, would increase by only 1.2% this year and 2.7% next year, after a 3% advance in 2018. This has weighed on the prospects of Indian exports as well.

Sharad Kumar Saraf, president of FIEO, said: “Prolonging trade tensions and protectionism along with sluggishness in the economies across the globe has further added to the woes of the India’s exports sector. The slowdown projected across the economies for short-term and medium-term and return to more normal trade relations among countries looks a mere probability.” The currency volatility besides fluctuation in commodities prices, including crude prices, have also led to the decrease in exports of petroleum, which is a major constituent of India’s exports, he added.

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