Exports posted an impressive 35.1 per cent growth at $16.1 billion year-on-year in May, but the lingering debt crisis in many Euro zone nations may slow down the pace of expansion in the coming months.

Exports in May grew on a low base of $11.95 billion a year ago when the consignments had plunged by over 29 percent from the previous fiscal under the impact of the recession in the U.S. and several other advanced economies.

Imports also surged 38.5 percent in the reporting month to $27.4 billion compared to the same period last fiscal, indicating a rapid pace of domestic economic activity. As a result, trade deficit widened to $11.29 billion from $7.8 billion a year ago.

“While we hope the growth trend will continue, the only worrying aspect is the crisis in the Euro zone economies, which is likely to affect our exports to those markets,” Federation of Indian Export Organisations president A. Sakthivel said.

A sharp erosion in the euro value has also reduced the margins of exporters. The euro has depreciated by about 17.5 percent against the rupee since last November.

Labour-intensive sectors like engineering, gems and jewellery, leather and man-made fibres have registered healthy growth rates in May, Commerce Ministry officials said.

Yes Bank chief economist Subadha Rao said though exports have not yet recovered significantly, the overall numbers this year are likely to be higher than those of 2009-10. “We expect exports to touch $195-200 billion level this fiscal year,” she said.

Battling the recession in the Western markets, which account for the bulk of shipments from the country, exports had dropped to $12 billion in May 2009.

Crisil principal economist D.K. Joshi said, “The pace of exports (growth) may slow down in the coming months because it is over a low base. The figures look good, though it is over a depression.”

Oil imports increased by a whopping 66.7 per cent to $8.8 billion in May, while non-oil imports rose by 32.3 per cent to $18.6 billion.

For the April-May period, exports grew by 35.7 per cent to $33 billion over the comparative months last year, according to the data released on Thursday.

Imports during the first two months grew by 40.9 percent to $54.74 billion year-on-year. During April-May, trade deficit increased to $21.7 billion compared to $14.5 billion last year.

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