New Delhi: India would miss its target for exports worth $200 billion (Rs10 trillion) in 2008-09, experts and analysts said, after the country’s exports shrank for the first time in 62 months following a decline in demand for Indian goods in the US and Europe, both of which are reeling under the impact of a credit crisis-induced economic slowdown.
They added that the trend could continue at least till June and a buyer of Indian merchandise said that the recent terror attacks in Mumbai would only make things worse.
In August 2003, exports from India had shrunk by 0.13% year-on-year. Since then, they have grown every month till October.
In the July-September quarter, the US economy shrank 0.5% while the Eurozone economy contracted 0.25%.
Click here to watch video
/Content/Videos/2008-12-02/0112_India Trade Woes_Pkg_MINT_TV.flv
Data released by the ministry of commerce and industry on Monday showed that in October, India’s exports in dollar terms declined to $12.8 billion compared with $14.6 billion a year ago. During the first seven months of the fiscal year (April-October), exports grew 23.7% to $107.8 billion from a year earlier.
“The decline in merchandise exports in October is not a one-off thing. The trend has just started and will continue till around June 2009,” said Soumendra K. Dash, chief economist with credit rating agency Credit Analysis and Research Ltd.
Also See Ominous October (Graphic)
Ajay Sahai, executive director of Federation of Indian Export Organisations (Fieo), says the data came as a surprise. “Nobody expected such a sharp decline in exports, though exports growth has been slowing down,” he said, adding that the outlook is not positive either. “With the prices of metals and chemicals declining by 40-50%, prices of such products (made of those raw materials) have also fallen, putting downward pressure on export realizations.”
He added that India’s exports target for 2008-09 “would not be achieved.”
Fieo president G.K. Gupta said he expects India’s exports to shrink 20% in November.
Exports may weaken further as foreign buyers stay away from India after the worst terror attacks in the country in 15 years. The new home minister, P. Chidambaram, who swit-ched from the finance portfolio on Sunday, said after the attacks that the government will provide help to textile, and gems and jewellery exporters as overseas demand wanes.
Overseas buyers will refrain from travelling to India for a while, said D.H. Pai Panandiker, president of the RPG Foundation, an economic policy group in New Delhi.
Denis Wright, a British citizen and partner in Marc-Denis International Llc., a New York-based firm that buys Indian cotton and beaded apparel and sells it in Brazil, said this will inflict serious damage on business in India. “Our company, like many companies, will do as much business on the Internet as possible and try to avoid going to India,” said Wright, who has been visiting the country five times a year for 20 years and stays frequently at the Oberoi hotel, one of the targets of the attack.
In rupee terms, however, India’s exports registered a positive growth (8.2%) in October, because the local the currency has depreciated around 20% since January. This beneficial effect has been more than offset by waning demand.
Amit Mitra, secretary general of industry lobby Federation of Indian Chambers of Commerce and Industry, said in a statement that the government should announce a comprehensive economic package for exporters. Sahai said exporters would seek an appointment with Prime Minister Manmohan Singh this month to raise their concerns.
Imports during October rose 10.6% to $23.4 billion. They grew 36.2% to $180.8 billion in the first seven months of the year. The trade deficit in the seven-month period of the current fiscal year rose to $318.5 billion, from $185.8 billion a year ago.
However, economists do not expect the trade deficit to widen substantially this year because imports too are slowing.
In October, oil imports rose 22% to $7.9 billion, while non-oil imports grew a mere 5.5% to $15.4 billion.
Bloomberg and PTI contributed to this story.
Graphics by Sandeep Bhatnagar / Mint