Exports shrink 0.3% on weak global demand

The country’s merchandise exports in August shrank 0.3 per cent year-on-year to $21.5 billion due to weak global demand and a fall in exports of petroleum products.

Exports of goods had contracted for 18 consecutive months from December 2014 to May 2016, but moved slightly to the positive territory in June with marginal 0.92 per cent growth because of a low base.

However, it quickly slipped back to the red in July when it shrank 6.86 per cent.

Imports in August contracted by 14.09 per cent to $29.19 billion.

Oil imports

Oil imports during the month were 8.47 per cent lower at $6.7 billion, while non-oil imports were 15.65 per cent lower at $22.45 billion. Gold imports contracted 77.45 per cent to $1.1 billion. The imports of the yellow metal have been contracting since February 2016.

Imports of machinery too contracted 2.09 per cent, while imports of transport equipment and project goods shrank by 24 per cent and 28.1 per cent respectively.

Trade deficit in August narrowed to $7.6 billion from $12.3 billion in August 2015. Trade deficit during April-August this fiscal also narrowed to $34.6 billion from $58.3 billion during the same period in the previous fiscal.

Centre’s initiatives

In a bid to boost exports, the Commerce Ministry is working on a strategy, which, sources said, is likely to include exchange rate policy adjustments, aligning freight rates with international norms as well as an easier visa policy.

Though there was speculation that the strategy could include possible rupee devaluation to strengthen the competitiveness of Indian exports in global markets, Commerce Minister Nirmala Sitharaman dismissed it by tweeting that: “I had no conversation on devaluation of any currency with any news correspondent. Any quotes/mentions referring to me on this topic baseless.”

Economic Affairs Secretary Shaktikanta Das too echoed her views saying: “The value of rupee is market determined and there is no plan to change the policy. The market reports that government want to devalue rupee is false.”

According to trade data released by the commerce ministry Thursday, non-petroleum exports in August grew by 1.79 per cent to $19.08 billion.

Exports of petroleum products for the month shrunk 14.08 per cent to $2.43 billion.

The commerce ministry said exports have contracted in other countries as well. Citing the latest World Trade Organisation statistics, it said the growth in exports in have fallen for USA (-4.35 per cent), European Union (-2.16 per cent), China (-4.94 per cent), but Japan exhibited positive growth (8.67 per cent) for June 2016 over the corresponding period of previous year.

Modest decline

S.C. Ralhan, president of the exporters’ apex body Federation of Indian Export Organisations (FIEO), said India’s goods exports showed a very modest decline of 0.3 per cent in August, adding that the decline in exports has largely been arrested.

“We can look for positive growth after a month or so helping us to reach around $280 billion of (goods) exports in 2016-17.”

Mr. Ralhan said: “Rupee should be allowed to move freely as per market forces so that Indian exporters can compete effectively with those countries whose currencies have depreciated significantly in the last one year or so.

“Other issues such as high logistics cost, high cost of credit and high transaction cost also need to be addressed to push Indian exports,” he said.