Merchandise exports up 13% in July, slowest in nine months.

India's merchandise exports rose in July at the slowest pace in nine months, reflecting the fading of a favourable base effect and fragile demand recovery in developed markets.

The slower growth in overseas shipments adds pressure on the government to offer additional incentives for the ailing export sector in a revised foreign trade policy it's scheduled to unveil on 23 August.

Exports rose 13.2% in July to $16.24 billion ('75,840.8 crore) from a year earlier, compared with a 30.4% year-on-year increase in June, as demand slackened for leather, electronic goods, readymade garments, tea and rice, commerce secretary Rahul Khullar said.

Exports may weaken in the coming months if the global economic recovery flounders and demand wanes in developed countries, he said.

Imports in July rose by a robust 34.3% to $29.17 billion on the back of stronger domestic demand, leaving a trade deficit of $12.93 billion for the month.

From April to July, exports reached $68.6 billion, an increase of 30.1%, while imports rose 33.3% to $112.2 billion.

The trade deficit in the first four months of the fiscal narrowed to $43.6 billion from $68.3 billion in the same period a year earlier.

"We do not think that financing the trade deficit is a major concern because of strong net capital inflows. In FY11, we expect a current account deficit of 3.7% of GDP (gross domestic product), but a balance of payment surplus of $15 billion," said Sonal Varma, India economist, Nomura Financial Advisory and Securities (India) Ltd, in a research note. Khullar said a $200 billion target for the fiscal year is achievable even if exports grew at a steady 15% from now.

A. Sakthivel, president of the Federation of Indian Export Organisations, said in a statement that exports are growing because India is shipping more to Africa, Latin America, the Middle East and Asia.

While praising the government's efforts to diversify India's export markets, he demanded that the new foreign trade policy include specific incentive packages for export sectors that are lagging behind, such as apparel, textiles, leather and tea.

Source : istockanalyst.com