NEW DELHI: India's exports contracted for the fifth straight month in September while imports rose marginally, pushing up the trade deficit to an 11-month high of $18.1 billion, official data released on Thursday showed.
Exports contracted 10.8% from a year ago to $23.7 billion, while imports rose 5.1% to $41.8 billion on a 31% rise in oil imports to $14.1 billion, the commerce ministry said in a statement.
"We are tracking the trade deficit levels carefully, as a high current account deficit could be detrimental for the country's balance of payments" an official told ET, adding, "This month's high deficit is worrying, but we have seen worse last fiscal."
Non-oil imports for the month showed a contraction of 4.5%, indicating that the economy was still struggling but rising crude consumption was worsening the trade deficit.
Record high trade deficit last fiscal had pushed up the current account deficit to 4.2% of GDP, but a sharp moderation in gold imports fuelled hopes that the gap would be lower, which was partly the reason the rupee has rallied smartly against the dollar over the last few months.
Although the trade gap has widened, some economists are hopeful of an improvement in the current account deficit. Citibank expects a current account deficit of 3.1% of GDP, its India economist Rohini Malkani said in a note to clients.
But trade experts don't see a rebound in exports, given the deteriorating outlook for the developed nations.
"The global economy is getting into further problem, which is clear from the latest scenario painted by the IMF," said Biswajit Dhar, director-general for developing countries at Research & Information System. "The competitiveness of our exports depends on how much we can reduce transaction cost," Dhar added.
Exporters blame the fall in exports on the high cost of credit and the fluctuation in the rupee.
"The biggest worry is the appreciating rupee, which has risen 10% recently, and the high cost of funds," said A Sakthivel, a garments exporter who also chairs the Apparel Export Promotion Council.
Exports have dipped sharply this fiscal due to shrinking demand from the West, a major market for Indian goods, and other markets such as Japan and Korea. The sectors affected the most include engineering goods, petroleum products, gems and jewellery, drugs and pharmaceuticals, and readymade garments.
Exporters say the government should offer more incentives for them to remain competitive.
SP Agarwal, president of Delhi Exporters Association, said the government should not only give more incentives to small exporters but also put in place a mechanism to shield them against currency fluctuations.
"Earlier this year, we quoted lower price in foreign markets as the rupee was down against the dollar and the euro, and we needed to fight our competitors. Now that the rupee has strengthened, it will not be easy to convince our buyers to give us more," Agarwal said, adding, "Moreover, we are not even sure what prices to quote as the rupee is so volatile."
An expert from a Delhi-based research body said the government should consider cutting red tape to help the sector. "We have not heard much about the Scindia Committee report on transaction costs after it was released last year. It is time for the government to act on the suggestions," he said.
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2 Comments on this Story
Marco Hsiao2972 days ago
[Refocus on East Asia]
India should make more effort on Chinese (Mainland ROC Taiwan Hong Kong Macau Singapore Malaysian Chinese community) markets.
A. S. Mathew2977 days ago
With the same number of people in the world, the consumption rate of consumer goods are being declined every day around the world, especially in the U.S. and Eurozone countries. India's drop of 10.78% in export has affected
thousands of people in the manufacturing sector of India. The whole world is not marching forward in prosperity and consumption, but marching backward to a very tight
and highly cautious spending habit; and this mentality can't be reversed any time soon.