Exports In May Ride High On Low Base.

Last week's dizzying export figures have left both government and industry truly foxed. Although some sectors like engineering have been doing well for a while now, commanding a quarter of India's total exports last year, an above 100% growth rate is goggle-worthy indeed. In other sectors like electronics too, the export growth has crossed the century mark while petroleum (75%), readymade garments (51%), man-made yarns and fabrics (50%) have all posted stunning growth.

Experts say a large component of that rah rah story lies in last year's low base. "The US and Europe were still reeling under the recession last year so this year's numbers look spectacular," said Sanjay Budhia, chairman, CII-National Committee on Exports. That is particularly true of sectors like garments. Also inflationary trends back home have driven up the total value of exports. Take garments. "The huge increase in yarn prices in January-February would have resulted in a spike in the value of garment exports (in May)," said P Nataraj, MD, KPR Mill. Yarn prices, which were ruling at Rs130 per kg, went up to Rs 240 per kg in January-February this year. Yarn accounts for about 40% of garment making costs and the huge jump in prices early this year would have pushed up the cost of produce shipped in May, industry officials said. It takes up to three months to produce and ship garments.

In sectors like electronics, the low base effect combined with some currency competitiveness to drive up export volumes and value. According to industry watcher Ashwin Agarwal, the growth in electronic goods exports from India has been driven by two factors. Firstly, India has a small base of electronics exports and therefore the growth rate might seem sharp. Also, a stronger Japanese yen has prompted global buyers to look at India and China.

Agarwal added that India has been gaining capabilities in segments such as instrumentation and telecom products making them globally more competitive. "India has been showing improvement in its electronics industry, but there is still a lot of room for improvement in building expertise," he added. Experts say recent government incentives for new products and territories have also helped expand both the basket of products in a sector like engineering and also global territories as Indian exporters went into new markets like Latin America and Africa.

Source : timesofindia.indiatimes.com