NEW DELHI: India’s international trade data for December 2008 tell a happy story of continuing growth in India even as the rest of the world
slows down.
Exports declined compared with December 2007, but the drop was restricted to 1.1%, at $12.7 billion, a big improvement compared with the decline in exports of 12.1% and 9.9%, respectively, in October and November 2008.
Weak exports reflect economic distress in export markets. By the same logic, strong import growth suggests still vigorous economic activity in India. Imports grew 8.8% to touch $20.25 billion. The modesty of this growth rate masks the vigour of import growth, excluding oil: a whopping 31.9% ($15.54 billion).
Thanks to falling crude prices, the oil import bill for December fell by 30.9% to touch $4.71 billion. What makes the spurt in imports significant is that India’s non-oil imports consist mostly of capital equipment and project goods. Strong growth in this segment suggests robust domestic economic activity.
The trade deficit for December 2008 narrowed to $7.57 billion compared with $10.07 billion in November 2008. This brings the cumulative trade deficit for the first nine months to $93.8 billion, 74% higher than the $58.98 billion clocked in the comparable period of 2007. Experts reckon that lower oil imports over January-March would help India end the fiscal with a trade deficit that is less than 40% higher than last year’s.
“While it is premature to read too much into the figures, the indication that one gets from this is that the negative effect on India may be tapering off,” said Nagesh Kumar, director general, Research and Information System for developing countries.
Since a major portion of India’s non-oil imports consists of project goods and capital equipment, a sharp rise here suggests that domestic investment activity may not have moderated to the extent being feared by most, Mr Kumar said. The export sector, too, seems to be recovering despite the fact that the recession in the West is deepening. He added that the investment figures for the month would more conclusively show where the economy was heading.
Exporters, however, are not yet ready to celebrate a turn in fortunes. According to Subhash Mittal, a Delhi-based exporter of carpets and textiles, his orders for carpets are lower by 10-12% this year compared with the previous fiscal, while orders for textiles have declined by 25%. Not only is the order position bad, but payments from buyers are also not prompt, complains Mr Mittal.
While exports have declined sharply in December 2008 for some sectors like handicraft and handloom (approximately 64%), textiles (13%) and gems & jewellery and chemicals (by about 21% each), the increase in exports of engineering goods, pharmaceuticals and agriculture products like tobacco and spices has been in the range of 19-25%, according to a commerce ministry official.
“The overall situation is not positive. As per my estimates, while the country’s total exports will certainly be more than $160 billion achieved last year, we will not meet the target of $200 billion,” Mr Mittal said.
India’s cumulative value of exports for the April-December 2008 period was $131.99 billion against $112.73 billion in the comparable period of the previous year registering a growth of 17.1%. The cumulative value of imports for the April-December 2008 period was $225 billion against $171.71 billion, registering a growth of 31.5%.
Source : The Economic Times