New Delhi: Exports declined in December for the third straight month, though at a slower pace, on shrinking overseas demand, official data showed.
Experts believe the latest trade data will put more pressure on the ruling United Progressive Alliance government to come out with fresh sops for exporters ahead of the general election due by May.
Also See Shrinking Fortunes (Graphic)
Falling exports may cause 10 million job losses by March, trade group Federation of Indian Export Organisations (Fieo) estimated. Exporters employ about 150 million people in India, the biggest provider of jobs after agriculture, according to Bloomberg.
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While exports during December were valued at $1.3 billion (Rs6,370 crore today), oil imports were at $4.7 billion and non-oil imports were at $15.5 billion.
“Negative growth in exports is a cause for worry, especially when the manufacturing sector is performing poorly. Exports of handicrafts is already facing a decline of over 50%, gems and jewellery by over 25% and textiles by over 20%. The government should come out with a relief package for exporters,” said Fieo president A. Sakthivel.
“India’s export outlook is gloomy. The global economic downturn has slowed international trade. No exporter is immune, as demand has weakened across the board, from resources to tech products. The rapid decline in external orders, a result of the sharp deterioration in global economic conditions in recent months, will weigh heavily on the industrial sector,” said Sherman Chan, an economist with Moody’s Economy.com.
Uncertain future: A file photo of a production unit. According to trade group Federation of Indian Export Organisations, declining exports may result in loss of 10 million jobs in the country by March. Jagadeesh NV / Hindustan Times
Arguing similarly, Soumendra Dash, chief economist at CARE Ratings, said, “India is certainly going to miss the exports growth rate of 20% on slumping demand from international markets. The matter of serious concern is that trade deficit of India has touched $41.8 billion (during April-December) despite a slew of measures have been taken by the government.”
However, an analysis put out by Goldman Sachs Global ECS Asia Research said, “Sequential numbers suggest that exports growth is not as bad as the October low (when exports declined by 12.1%). In addition, strong non-oil imports suggest that there is still some domestic demand.”
The cumulative value of exports for April to December was 17.1% higher at the level of $13.1 billion, while imports in the same period rose by 18.1% to $18.6 billion. The trade deficit—exports less imports—in the first nine months ended December aggregated $93.82 billion, little less than double that of $58.98 billion in April-December of 2007-08.
The trade deficit could have been higher if international prices of oil had not fallen so steeply since August.
Oil secretary R.S. Pandey said: “The December prices were low... This doesn’t make much sense in a highly volatile crude oil market.”
The average crude oil price in India’s energy basket for December was $40.61 a barrel, 53% lower against the $87.92 a barrel in December 2007; the average crude for January is $43.99 a barrel.
Petroleum imports are yet to see a decline as data provided by the oil ministry shows that domestic refineries were operating at 106.3% of capacity in December, marginally higher than the 103.5% in December 2007. The export scenario won’t improve unless the global economy recovers, said D.H. Pai Panandiker, president of RPG Foundation, an economic policy group in New Delhi. Job losses in an election year are bad news for any incumbent government.
As Moody’s Chan points out, the decline in export orders is also beginning to impact the domestic industrial sector. Industrial growth, which contracted for the first time in 15 years in October, grew by 2.4% in November.
For the first eight months ended November of 2008-09, industrial growth averaged 3.9% compared with 9.2% in the same period in 2007-08.
Graphics by Sandeep Bhatnagar / Mint
Bloomberg contributed to this story.