India’s merchandise exports dipped for the second consecutive month, as the ongoing global recession shaved off demand from key markets like US and Europe.
The country’s exports fell by 9.9 per cent to $11.5 billion in November 2008, as compared with $12.76 billion in the same month in 2007. In October 2008, exports declined by 12.1 per cent for the first time in more than five years.
Higher base effect, as exports grew at 30 per cent in November 2007, is also cited as another reason for the dip in exports, experts said.
Economists expect that the slowdown in exports will continue in the coming months. “Exports could dip in December as well as demand from key markets like the US and European Union is unlikely to revive,” said DK Joshi, principal economist at credit rating agency Crisil.
However, in rupee terms, overseas sale of Indian goods expanded 12 per cent, which could be attributed to the 26 per cent depreciation of the Indian rupee against the US dollar in the 12 months up to November 30, 2008.
Trade deficit, the difference between merchandise exports and imports, now stands at $10 billion in November 2008, as compared with $7.5 billion in year-ago month. This would have been higher had it not for much slower 6.1 per cent growth in imports.
The slowdown in exports may not put pressure on the Balance of Payments, as the pace of imports have also slowed down, with crude oil prices falling to less than $45 a barrel, Joshi added.
Exports account for about 15 per cent of the Indian economy and slowdown in its expansion rate has led to companies laying off employees.
Going by the export performance in October and November, India is likely to miss the export target of $200 billion in 2009, for which exports needed to post about 23 per cent rise over $162 billion exports in 2007-08. In the April-November period, Indian exports rose 19.4 per cent.
Moreover, weak demand in the Indian economy also lead to a weak growth in Imports, which grew at 6.1 per cent and stood at $21.5 billion compared with $20.3 billion in the same month of the previous year. This is the slowest pace of expansion in imports after September 2007, when Indian imports expanded by only 1 per cent.
The US and European Union, which have been hit hard by the ongoing economic gloom, account for nearly 35 per cent of India’s export basket.
Dip in India’s exports comes at a time when other Asian economies are also having difficulty in maintaining a healthy growth rate in selling goods to overseas markets. China, Asia’s fastest growing economy, recorded a 2.2 per cent dip in exports for the first time in seven years. Singapore’s exports also posted the biggest contraction in six years during November, news agency Bloomberg said.
OIL IMPORTS INCREASE BY 12 PER CENT:
Oil imports by India during November 2008 expanded 12 per cent and stood at $7.2 billion, as against $6.4 billion in the same month of 2007. The fall in value of the crude oil, which has come down by over $100 a barrel since July 2008, led to a decrease in the oil import bill.
Non-oil imports, which includes raw material and capital goods used by the industry, expanded by only 3.4 per cent and stood at $14.31 billion, compared with $13.84 billion in the year-ago month. This probably could be due to the fact that Indian industry is producing lesser goods and has postponed expansion plans.
The government is likely to announce a second series of measures to boost demand in the Indian economy as well as support exports. In the first week of December, the government had announced a series of measures, which include cheaper export-related loans to labour intensive sectors like textiles and leather.
Reacting to the dip in exports, A Sakthviel, president of Federation of Indian Export Organisations, demanded an increase in the Drawback and DEPB rates by 3 per cent and asked for a 2 percentage point subvention in export credit for garments, textiles, gems and jewellery, handicrafts, marine, sports goods, agro and allied sectors.
Source : Business Standard