Exports rise 35% to $16.1 billion on West recovery.

NEW DELHI: Improving demand in western markets propelled India’s export figures to $16.1 billion in May, up 35.1% year-on-year, but a cautious commerce ministry felt it was too early for celebrations. “Don’t get carried away by these numbers because the base was low,” said commerce secretary Rahul Khullar.

Imports rose to $27.4 billion in May, jumping 30.8% as compared to the corresponding period last year, widening the country’s trade deficit to $11.3 billion.

India is targeting a 15% growth in exports in the current fiscal. During April-May 2010, Indian exports stood at $33 billion, up 35.7% year-on-year.

Khullar said iron ore exports for April-May have more than doubled over a year earlier, while oil exports have benefited from India's growing refining capacity and rising external demand.

Indicating a steady recovery from the drubbing received during the slowdown, export figures have shown an increase in the last seven months since November 2009.

May’s robust performance was mainly on back of a 31.24% increase in gems and jewellery, which touched $2.46 billion in May. Gems and jewellery is the largest contributor (around 16%) to the country’s total export basket, and was one of the worst hit during the slowdown.

Mr Khullar said that during the first two months of the current fiscal, imports went up by 29.1% to $54.7 billion as compared to last year. Trade deficit for April-May stood at $21.7 billion.

Oil imports have surged on higher demand and prices while India's appetite has also risen for ferrous and non-ferrous metals, machine tools and transport equipment, he said. "What are you are really see-ing is evidence on the import side of the reason why 17.6 is your growth," he said.

India's industrial output rose 17.6% in April from a year earlier, the strongest since December 2009. India's current account deficit widened marginally in the December quarter to $12.03 billion because of a decline in invisible receipts.

"A lot of industry is now building up their capacity," said NR Bhanumurthy, economist at National Institute of Public Finance and Policy, a Delhi-based think tank. "This year the policymakers are more or less mentally prepared for a higher current account deficit," he added. "It is not a scary situation because we have a huge cushion in foreign exchange reserves."

Analysts and senior government officials that ET spoke to felt the European crisis may not affect exports as much it did during the slowdown. India’s chief statistician Dr Pronab Sen had told ET on Monday that earlier a large volume of our exports was based on trade credit, which was taken from international banks.

“Now Indian banks have come back to trade credit business. So a banking crisis won’t affect much. What will affect us is the slowdown in international demand. If international trade comes down, it’ll impact us, but the effect won’t be too large,” he had said.

Source : The Economic Times