New Delhi: India’s exports plunged the most on record in March, extending the longest declining streak in a decade, as recessions in the US and Europe damped demand for the nation’s products.
Quality concerns: Commerce secretary G.K. Pillai says the government will come out with stringent norms for domestic toy manufacturers. Madhu Kapparath / Mint
Merchandise shipments dropped about 31% from a year earlier to less than $12 billion (around Rs60,000 crore) last month, commerce secretary G.K. Pillai said, releasing provisional figures.
The decline in March, the sixth straight monthly fall, is the biggest drop on record, according to Bloomberg data going back to 1995. Exports contracted 21.7% in February.
The negative trend in export growth may continue till September, Pillai told reporters in New Delhi on Monday. The problem is a steep decline in demand from the US and Europe, the nation’s biggest markets.
Companies such as Tata Motors Ltd, India’s largest maker of commercial vehicles, and Japan’s Honda Motor Co. Ltd are paring output in India amid the world economy’s worst crisis since the Great Depression. Prime Minister Manmohan Singh’s government, seeking re-election before May, has announced cheaper credit, tax refunds and easier trade rules to help exporters maintain profits and minimize job losses.
India’s overseas sales in the fiscal year to 31 March rose to $170 billion, missing the target of $200 billion, Pillai said. The nation’s imports fell 37% in March.
The next administration will have to take measures to help exporters, Pillai said. The government will release the March trade figures on 1 May.
To help stoke demand, Singh’s government has announced three stimulus packages, including cutting taxes on consumer products and services, injecting capital into banks, and higher spending on roads, ports, utilities and other infrastructure projects.
Efforts to protect India from the impact of the global slump started in October when Reserve Bank of India governor D. Subbarao cut the key interest rate for the first time since 2004. The central bank has lowered the repurchase rate five times to an all-time low of 5%.
India has scope to use its monetary policy if needed, Prime Minister Singh said on Monday in Mumbai.
Declining overseas orders and shrinking local demand may result in growth being slightly less than 7% in the fiscal year to 31 March 2009, Singh said.
The $1.2 trillion economy grew 5.3% in the three months to 31 December, the weakest pace of expansion since the last quarter of 2003.
To protect the local industry from a surge in imports from China, the government plans to impose a 20% safeguards duty on the import of soda ash from China, Pillai said. The government has already imposed duties on imports of aluminium and some chemicals from China.
Separately, Pillai said the government will soon come out with stringent norms for domestic toy manufacturers to ensure that their products are free from toxic substances.
“...the process is under way and would soon be notified for domestic toy manufacturers,” Pillai said, adding countries exporting toys to India would also have to meet the prescribed quality norms.
“You cannot have toxic toys domestically also,” Pillai told reporters at the Indian Institute of Foreign Trade here on Monday.
The move assumes importance as China had complained that the quality restrictions imposed by India on Chinese toys are violating the World Trade Organization rule of treating all member countries alike.
PTI contributed to this story