Fall in gold, non-oil imports help narrow trade gap to $10.56 bn, almost half that in same month of 2012
The rupee's depreciation against the dollar might have left many worried but it has a bright side, too. Boosted mainly by the rupee's weakness since July and a demand revival in key markets, India's merchandise exports in October soared to $27.27 billion from $24.03 billion in the same month last year - an increase of 13.47 per cent, the highest since 23.7 per cent seen in October 2011.
The increase in October, the fourth straight month of double-digit export growth rate, was in stark contrast with a dull phase from the beginning of last financial year to June this year. In 2012-13, the country's total exports had fallen 1.76 per cent from the previous year to $300.60 billion. The contraction had continued in May and June this year. But India's exports have grown at a double-digit rate in each of the four months since July. During the July-October period, the rupee's value against the dollar declined 13 per cent compared with the year-ago period.
"We are seeing consistent double-digit export growth rates. All major sectors with significant contribution in the export market have shown a positive trend… We are confident of reaching the export target (of $325 billion) this financial year," Commerce Secretary S R Rao said while releasing the data here.
Rao said exports to all major regions of the US, Europe, Africa and Asean were rising. Those to South Asia and Latin America were, however, marginally low.
Imports, on the other hand, have been falling continuously since June - at double-digit rates since September. In October, imports stood at $37.82 billion, down 14.5 per cent from $44.24 billion in the same month a year ago. This narrowed the trade gap in the month to $10.56 billion, almost half that in the same month last year, showed data released by the commerce & industry ministry on Monday.
However, on a month-on-month basis, imports were higher than September's $6.7 billion. This was partly due to $1.3-billion gold imports in October 2013 - 62.5 per cent higher than the previous month's $0.8 billion but 80 per cent lower than $6.8-billion gold imports in October 2012. The total imports of gold and silver during the April-October period this year dipped 12.86 from those in the year-ago period to $24.5 billion, mainly due to various curbs imposed by the government.
Rao said the sharp fall in gold imports in September was because confusion over the Reserve Bank of India's 80:20 scheme led to imports being held up at Customs.
The total exports during the first seven months of the financial year through October rose 6.32 per cent to $179.38 billion, compared with $168.71 billion in the same period last year. Cumulative imports during the same period stood at $270.06 billion, against $280.73 billion, down 3.80 per cent.
The total trade deficit during the April-October period reached $90.68 billion, compared with $112.03 billion during the corresponding period of 2012-13. The government aims to lower its current account deficit, which includes trade deficit, to $60 billion in 2013-14, from $88 billion the previous year.
The rupee's depreciation is helping narrow the trade gap, as outbound shipments are increasing. So, it seems the currency's fall, contrary to the general belief, is actually helping fight a soaring trade deficit.
According to CRISIL, exports have been rising due to a weak rupee and rising global demand on the back of a gradual recovery in the US and Europe. A weaker rupee helps boost exports by raising the relative price competitiveness of Indian goods, particularly in export sectors like textiles and agricultural products.
Besides a weak currency, low domestic demand also helped contain imports. Non-oil imports in October reached $22.60 billion, 22.80 per cent lower than $29.28 billion in the same month last year. Cumulatively, non-oil imports during the April-October period reached $171.96 billion, down 7.43 per cent from $185.76 billion during the same period last year.
The non-oil, non-gold imports so far this year stand at $147.46 billion, 6.46 per cent lower than $157.66 billion in the corresponding period last year.
A lot of import substitution has happened due to a weaker rupee, but this also points to lack of demand for these products in the country. This is buttressed by the fact that industrial growth in the first five months of the current financial year stood at 0.1 per cent, despite the low base of 0.2 per cent in the comparable period of last year.
Oil imports, on the other hand, have reached $15.21 billion in October 2013, up 1.7 per cent from $14.95 billion in the month last year. Total oil imports till October grew 3.3 per cent to $98 billion from $94.9 billion, the data showed.
International price trends were also partly responsible. The crude oil prices fell to $103 a barrel last week, the lowest in the past four months. Similarly, coal prices hit a low of $76.45 a tonne on July 10 this year; but these have risen 6.5 per cent since.
Exports of agricultural products, engineering goods and electronics showed healthy growth in October.
"While exports have shown a convincing rebound, the tempo can be sustained and improved by making Indian products more competitive in the global market, where green shoots are visible. The finance ministry should immediately address the issue of duty drawbacks," said Anupam Shah, chairman, Engineering Exports Promotion Council.
The Federation of Indian Export Organisations pegged the trade deficit for this financial year at about $140 billion, which it said would ease pressure on the current account deficit, bringing it down to $50 billion in 2013-2014.
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