Coming in the wake of figures pointing to a robust recovery in GDP growth, the evidence that, after as many as 13 months, India’s month-on-month export growth has returned to positive territory has generated much optimism. The value of aggregate merchandise exports during November 2009 stood at $13199 million (Rs. 61462 crore), which was 18.2 per cent higher than its level in November 2008. Part of the increase was of course on account of dollar depreciation with the rupee value of exports rising by a lower 12.4 per cent. But this too is significantly positive and warrants optimism. However, there is a case for exercising caution when interpreting this evidence as a sign of export recovery.

First, there is a base effect operative here. The monthly value of India’s exports in dollar terms had begun to decline since August 2008 and had fallen by 41 per cent by November 2008 as a result of the impact of the global recession. Also November 2008 was the first month in 2008 when aggregate export value declined significantly (13.5 per cent) relative to the corresponding month of the previous year. Since the November 2009 performance is being compared with a month that saw a sharp downturn in growth during the previous year, even a modest recovery in absolute levels can deliver a creditable month-on-month growth rate.

Second, in absolute terms the dollar value of exports in November 2008 was below its July 2008 peak by as much as 31 per cent.

Third, India’s exports in November 2009 were in absolute terms below the levels at which they were during the months of July to September 2009, when the first signs of the export downturn bottoming out had been observed. The month-on-month export decline rate fell from a high of 36 per cent in April 2009 to 14 per cent in September 2009. Since then export performance has slipped rather than improved. In sum, if at all anything can be said about the export figures it is merely that the downturn in exports has possibly bottomed out, but that any significant recovery is yet to come.

The limited buoyancy on the merchandise export front is disconcerting also because of the effect that the global recession has had on India’s exports of software and business services. Data for receipts from abroad under these heads are released by the Reserve Bank of India on a quarterly basis and are now available for the first two quarters of 2009-10. Those figures suggest that exports of software services fell from $24.2 billion during April to September 2008 to $21.4 billion during April-September 2009, and exports of miscellaneous non-software services fell much more sharply from $14.9 billion to $7.8 billion. The hardest hit in the latter area were business services, receipts from which fell from $8.4 billion to $5.1 billion between April-September 2008 and April-September 2009.

The net result of this was that, even though remittances from non-resident Indians remained strong, net invisibles receipts fell sharply from $48.5 billion during April-September 2008 to $39.6 billion during April-September 2009. Given the importance of invisibles in the current account of India’s balance of payments, this has meant that the country’s current account deficit has widened from $15.8 billion to $18.6 billion. Unless this trend has corrected itself over the subsequent two months, the reduction in the rate of export decline does not amount to much in terms of a strengthening of the balance of payments since the global recession had its first impact.