NEW DELHI: India's exports contracted at a lower rate in October than in recent months following a positive growth in a number of sectors in the recent months, suggesting that demand may be beginning to look up in the developed world.
A part of the improvement could, however, be due to the base effect, a decline in exports in October 2008 due to a sudden deterioration in global trade because of the financial crisis. That the heavyweight sectors such as engineering goods and readymade garments continued to decline also take some sheen off the October numbers. Exports contracted 11.4% in October 2009, the thirteenth straight month of decline. This is still seen as an improvement as the fall in exports was as high as 39.2% in May 2009.
“If the current trend continues, exports are expected to turn positive in January,” commerce secretary Rahul Khullar said. However, the overall export figures for the fiscal would be marginally lower than exports in 2008-09, he added.
The improvement is due to a number of high value exports sectors beginning to grow in recent months. These include drugs and pharma, cotton yarn fabrics, electronic goods, and iron ore. Some of these had actually started growing from August 2009 itself. “This is the first vindication of the green shoot hypothesis,” Mr Khullar said.
Amid a debate over stimulus withdrawal, this sign of pickup could invite suggestion of roll back for exports sector as well. Mr Kullar dismissed any such notion saying, “There shouldn’t be a roll-back just because one is seeing the first signs of some recent recovery”.
With Christmas and New Year pushing up demand in the Western markets, including the EU and the US, exporters are hopeful of demand going up and exports turning positive by the beginning of the new year.
Despite the better outlook, they still feel a need for more help from the government. “There should be an immediate increase in duty drawback rates to provide price competitiveness to Indian exporters so that it gives a fillip to exports,” said A Sakthivel, president of the Federation of Indian Export Organisations, an alliance of export promotion bodies in the country.
The decline in exports had peaked at 39% in May this year, and then subsequently started going down. In September 2009, the fall in exports was a relatively low 13.8%.
Source : The Economic Times