India’s exports rose by some 19% to $12.8 billion in September, ending the first half of the fiscal year with an impressive average growth of 18.5%, but masking the fact that export realizations were suffering as the dollar became cheaper.
In rupee terms, the export growth worked out to 4.3% in September and 5.3% in the first half, according to figures released by the commerce ministry.
Compared with the annual target of $160 billion set by the ministry, aggregate exports at the end of September were $72.28 billion.
“The dollar value rise may give rise to jubilation in some quarters, but we need to look at it from the exporters’ angle,” said D.K. Joshi, principal economist at ratings firm Crisil Ltd. “It is clear that their profit margins have been hit, as unit value realization in terms of rupee has been going down steadily.”
According to the Federation of Indian Export Organizations (FIEO), traditional sectors such as textiles have shown a consistent drop in realizations. In the first six months of the year, the rupee has appreciated 5.2% against the dollar.
Also, for the first time this year, non-oil imports declined by 0.15% in September, though in the first six months it has grown at an average rate of 34.13% at the level of $58 billion.
Overall imports rose 25.51%, in the same period, to $109.20 billion.
As a result of the sharp drop in imports, trade deficit narrowed to $4.4 billion in September, compared with a little more than $6 billion a year ago. For the first six months of the year, however, it aggregated $36.9 billion, which is 42% higher than it was at the same time last year.
Joshi said the import figures could be “a one-off” happening, as even in the last fiscal, imports had risen at a healthy rate of over 35%.
“According to conventional wisdom, when the exchange rate appreciates, imports usually shoot up, while exports take a hit. The import drop defies this wisdom,” he said.
Said FIEO president G.K. Gupta: “Despite the resilience of exports in dollar terms, it’s clear that the target cannot be achieved.”
Gupta also said that “with the 15% appreciation advantage on imports, there is no reason for import slowdown, particularly when economy is doing well.”
He worried that this would “lead to a slowdown of manufacturing activity since no industry would be replacing the imported inputs with costlier domestic ones.”