New Delhi: A pick-up in external demand for products such as electronic goods, iron ore, drugs, oil meal and handicrafts is leading to a slow recovery in India’s exports with the contraction slowing to 11.4% in October compared with a 13.8% decline in the previous month. However, exports in value terms, declined to $12.5 billion (Rs58,250 crore) in October from $13.6 billion in September.
“This is the first indication of green shoots (of recovery) in the exports sector. There is now credible evidence that there is a steady turnaround across the board,” commerce secretary Rahul Khullar said. Khullar said the recovery is due to the rise in demand in sectors such as gems and jewellery and textiles, export diversification and the stimulus.
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Although major contributors of exports such as engineering goods and gems and jewellery are still in the negative zone, they have regained some ground since April. For example, engineering goods contracted by 6% in October compared with a 11.9% drop in May. Similarly, exports of gems and jewellery shrank by only 7.8% in October compared with 26.9% in April. In the first seven months of the current fiscal year (April-October), exports have declined 26.5% to $90.4 billion from $123 billion in the year earlier.
“Exports may turn positive on a month-on-month basis starting January, but it’s unlikely to enter the positive zone compared with the last year before the beginning of the next fiscal,” Khullar said. However, Khullar said the nascent recovery should not be used as a reason to withdraw the stimulus packages provided to the sector, at the same time holding that everybody should be ready for “crunch times” next fiscal.
India’s merchandise exports started contracting in October last year in the wake of the slowdwon, when it registered a drop of 11.4%. The rate of decline in exports peaked in May 2009 at 39.2%, before it started moderating in the subsequent months.
Commerce minister Anand Sharma said recently that the government will offer additional stimulus to certain labour-intensive sectors such as coffee. Exports of the commodity in the current financial year (April-October) shrank by 34.9%. He ruled out any early withdrawal of stimulus measures for exporters.
“We are hopeful that exports will show a positive growth in the first quarter (January-March) of next calendar year. With positive vibes in US and Europe, Christmas and New Year sales will push Indian exports,” A. Sakthivel, president, Federation of Indian Export Organisations, said in a statement.
“I don’t see the need for any additional stimulus packages. Unless there is a recovery in the world economy, any kind of stimulus to the sector cannot bring about a turnaround. I expect exports to register positive growth in the January-March quarter purely due to the base effect,” said N.R. Bhanumurthy, professor at the New Delhi-based economic think tank, the National Institute of Public Finance and Policy.
The International Monetary Fund has projected world exports to contract by 11.4% this year and grow 2.6% in 2010. According to the World Trade Organization, global merchandise exports increased by about 8% in the second quarter of 2009 over the preceding quarter, though year-on-year growth continued to decline by 33%. The composition of the export basket in 2008-09 suggests that manufactured goods account for the largest share in total exports at 67.2%, followed by petroleum and primary products. Destination-wise, developing and Organisation for Economic Co-operation and Development countries were the major markets for India’s exports during 2008-09, with each accounting for at least 37% of total exports followed by the Organization of the Petroleum Exporting Countries nations (21.2%). Country-wise, the United Arab Emirates became the single largest export destination for India in 2008-09, replacing the US.
Sharma told the members of the parliamentary consultative committee attached to his ministry that he would like to achieve export growth of 15% in 2010-11. He added that in the remaining three years of the 2009-14 Foreign Trade Policy regime “the country should be able to come back on the high export-growth path of around 25% per annum.”
Graphics by Sandeep Bhatnagar / Mint