It would be premature to think of a sharp turnaround in India’s foreign trade based on just one month’s figures. However, given the continued fall in both imports and exports for nearly 12 months in a row, the trade figures for November 2009 released recently by the Director-General of Commercial Intelligence and Statistics, give room for optimism, especially in exports. In that month, exports at $13.19 billion were 18 per cent higher than a year ago ($11.16 billion). Imports too have fared better, registering only a modest 2.6 per cent decrease, which is in sharp contrast to the double-digit decline witnessed through the current fiscal year till October. Positive export growth helped along by the decline — though slower — in imports resulted in the narrowing of the trade deficit to $9.69 billion, as against $12.32 billion in November 2008. While as a rule, a narrower trade deficit ought to be welcomed, the circumstances leading to it matter as much as the trade figures for one month. Even over an eight-month period, April-November 2009, exports and imports on an aggregate basis are well below the levels during the corresponding period of the previous year. Exports are down by 22 per cent and imports by over 27 per cent. The overall trade deficit during this period stands at $66.18 billion, down from over $100 billion the previous year.

An urgent task before the policy-makers is to help sustain the positive trend in exports over the remaining months so that the annual target of $165-170 billion is achieved— the same level as in 2007-08. The decline in exports was due to the sharp fall in demand in the principal overseas markets — the United States, the European Union, and Japan. With the worst of the recession behind them, these countries would be able to import more from India. Export organisations have urged the government to continue extending support, particularly for the labour-intensive export segments such as leather, handicrafts, gem and jewellery, and agro-industries. A strengthening rupee has been another area of concern for the exporters but the scope for intervention by the Reserve Bank of India is limited at this juncture. A fall in both oil and non-oil imports has contributed to the continuing decline in imports. Petroleum prices have remained relatively low since October last year, though they have been rising more recently. The drop in non-oil imports by nearly 24 per cent till November is a cause for concern, reflecting as it does the lower investment in capital goods.

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