Despite a strong rupee, exports rose 18.5% to $12.5 billion in July over June. Together with a more moderate growth in imports—which rose by 20.4% to $17.5 billion—it resulted in the smallest expansion of trade deficit in the first four months of this fiscal.
According to trade data released by the commerce ministry on Monday, the trade deficit was $5 billion in July, which is only a 25% increase over a year ago. It had more than doubled in June, while it expanded by 46% in May and 79% in April, when compared to the same period in 2006-07.
D.K. Joshi, principal economist at domestic rating agency Crisil, said the resilience of Indian exports in the face of an appreciating rupee was remarkable. “But costlier oil imports will contribute to a wider trade deficit from August onwards,” he added.
However, the trade data, measured in rupee terms, suggest that the impact of the stronger Indian currency has already begun to result in lower realizations for exporters. It rose by 3% in July, less than 1% in June and 6% in May.
Ajay Sahai, director general of the Federation of Indian Export Organizations, said the extent of the trouble exporters are facing is clear from the fact that last year in July, exports had grown by over 40%.
According to Rajeev Malik, economist at JP Morgan Chase, a strong growth in oil-related exports could also have been responsible for the export buo-yancy. In 2006-07, his calculations show, exports of oil-related products contributed to 14.7% of the total export earnings, up from 8.4% in 2004-05.
PTI contributed to this story.