India’s merchandise exports returned to double-digit growth in January after two months, raising hopes that the government may be able to achieve the $300 billion (Rs.14.8 trillion) export target for the current financial year.
However, commerce secretary Rahul Khullar warned that 2012-13 will be a “very difficult” year for Indian exporters.
In January, exports rose 10.1% to $25.4 billion while imports grew 20.3% to $40.1 billion, creating a trade deficit of $14.7 billion. Cumulatively, exports during the first 10 months of the fiscal year (April-January) stood at $242.8 billion, growing 23.5%. Imports during the same period were up 29.4% to $391.5 billion, resulting in a trade deficit of $148.7 billion.
Khullar said he expects exports to be close to the commerce ministry’s target of $300 billion in the current financial year ending 31 March. “Even if exports in the last two months of the year (February and March) remain at last year’s level of $54 billion, it will stand at $297 billion,” Khullar said. “I would say $295-305 billion of exports for the full year is your strike rate.”
The next financial year is expected to be tough for exporters given global macroeconomic headwinds, Khullar said. “There is still uncertainty in Europe. Consumer and business confidence is not booming... If we can achieve 20% export growth next year, it will be a good thing,” said Khullar, adding that there is also little fiscal headroom for the government to offer concessions to exporters.
During the 10-month period to January, while the engineering sector contributed the most ($49.7 billion) to the export basket, other key sectors were petroleum ($48.9 billion), gems and jewellery ($37 billion), and readymade garments ($10.9 billion).
Petroluem was the biggest contributor to India’s imports ($117.9 billion). Gold and silver added $50 billion each.
The import bill has increased due to high oil, fertilizer and coal prices, said Khullar.
Imports could touch $460 billion in 2011-12, leading to a trade deficit of $160 billion, while the current account deficit (CAD) could touch 3.5% of gross domestic product, Khullar added. CAD occurs when a country’s total imports of goods, services and transfers are more than its total exports of goods, services and transfers.
While weaker demand for merchandise exports, along with inelastic oil and gold imports, may further widen the trade deficit, CAD may, in addition, be prone to risks emanating from moderation in receipts on account of software exports, business services and investment income, the Reserve Bank of India said in its quarterly macroeconomic and monetary developments report released last month
The trade figures clearly indicate that 2012 will be a difficult year for exports in view of growing uncertainty in the euro zone and slackening demand in other advanced economies, said M. Rafeeque Ahmed, president, Federation of Indian Export Organisations.
The trade deficit may touch $170 billion in view of rising crude prices and growing imports of gold and silver, Ahmed said.
Source : livemint.com