Sagging export volumes amid the Make in India dream

With overseas demand in the dumps, the latest trade data makes for dreary reading

Graphic: Subrata Jana/Mint
Graphic: Subrata Jana/Mint

It is Make in India week in Mumbai and the buzz in the city is all about getting more foreign direct investment and boosting exports. But with overseas demand in the dumps, the latest trade data makes for dreary reading. Even after accounting for lower commodity prices, and adjusting for oil and gold trade.

Take non-petroleum product exports. In January, these totalled $19.12 billion, about 10.5% down from a year ago. Several manufactured goods industries reported this decline. Engineering goods exports fell by more than a quarter, textiles by 6.1% and leather by 12.1%.

To be sure, lack of demand and deflation worldwide is one reason for this sharp fall. However, calculations by Sonal Varma and Neha Saraf, economists at Nomura Financial Advisory and Securities (India) Pvt. Ltd, show that volumes fell 0.4% in January after falling 0.2% in December.

Import data doesn’t show a better picture either. Imports of capital goods, which are usually a sign of investment demand recovery, fell in many categories. Transport equipment imports fell 21.1% and project goods fell similarly. Overall, non-oil non-gold imports, a signal for domestic demand, fell 7.5% from a year ago in January.

While this fall in imports is totally in pricing terms— that is, volume growth is still in positive territory—Nomura calculations show a weakening trend. Import volume growth in January declined to 9.5% from a year ago compared with 13.7% in December and nearly 20% in the early months of 2015. That indicates all is not well with domestic demand too.

With Reserve Bank of India (RBI) governor Raghuram Rajan resisting pressure from exporters and policymakers to devalue the rupee to support exports, all eyes turn to the Union budget to see what incentives the finance minister will announce to boost exports.

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