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Business News/ Politics / Policy/  Exports contract by record 21% in March, trade deficit widens
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Exports contract by record 21% in March, trade deficit widens

Exports earn $24 bn in March, while imports shrink13.44%to$35.8bn; trade deficit of $11.8 bn highest in four months

For the full 2014-15 fiscal year, exports contracted 1.23% to $310.5 billion while imports shrank 0.6% to $447.5 billion, leaving a trade deficit of $137 billion. Photo: BloombergPremium
For the full 2014-15 fiscal year, exports contracted 1.23% to $310.5 billion while imports shrank 0.6% to $447.5 billion, leaving a trade deficit of $137 billion. Photo: Bloomberg

New Delhi: At a time India is aspiring to double its exports to $900 billion by 2020, its merchandise exports contracted in 2014-15 after shipments in March shrank by a record 21.06% because exports of petroleum products plummeted on lower crude oil prices.

Merchandise exports earned $24 billion in March while imports shrank 13.44% to $35.8 billion in the same month, leaving a trade deficit of $11.8 billion, the highest in four months, data released by the commerce ministry on Friday showed.

China’s exports also shrank during March by 15%, the worst in about a year, as a rising yuan hurt demand for Chinese goods and services abroad.

Petroleum exports, which constitute 19% of the total, fell 60% in March to $2.4 billion, driving down overall shipments. Among other major items, exports of jems and jewellery, pharmaceuticals, chemicals and engineering goods contracted by 8.36%, 2.03%, 5.36% and 2.55%, respectively. The only major export that grew in March was textiles, with shipments increasing by 2.83% to $1.6 billion.

Oil imports contracted 53% to $7.4 billion, while non-oil imports that signal economic activity in the domestic economy remained barely changed at $22.8 billion.

The government in its five-yearly foreign trade policy announced on 1 April revamped the export subsidy regime and indicated its intention to phase out subsidies for overseas shipments in compliance with rules of the World Trade Organization (WTO) while setting an ambitious export target of $900 billion to be met by 2019-20. If the target is met, India would grab a share of 3.5% of world exports, up from 2% in 2013-14.

However, WTO on Tuesday projected a pessimistic outlook for global trade with growth in the volume of world merchandise trade forecast to pick up only slightly over the next two years, rising from 2.8% in 2014 to 3.3% in 2015 and eventually to 4.0% in 2016, remaining well below the annual average growth of 5.1% posted since 1990.

Though growth has been firming up in the US, aided by improving labour and housing market conditions, appreciation in the dollar in recent months have dampened prospects for exports. Since the start of 2015, the rupee has gained 0.87% against the dollar.

In the euro area, economic conditions remain weak although a pickup was observed in the fourth quarter of 2014 and the early months of 2015, supported by lower crude prices and the depreciation in the euro as well as higher bank lending.

Yes Bank Ltd, in a research note, said the risks from a slowdown in global growth could be countered to a certain extent as the government focuses on building a strong institutional export architecture and provides support by diversifying or enlarging India’s export base to developing nations.

“With gradual improvement in global demand and structural support from the new foreign trade policy, we remain optimistic of our FY16 export growth forecast at 4%. As such, we expect CAD (current account deficit) to moderate to 0.9% of GDP in FY16 against 1.2% in FY15," it added.

Aditi Nayar, senior economist at rating agency Icra Ltd, said that while she expects stable commodity prices to curtail the CAD in 2015-16 to under 1% of gross domestic product, “the weak momentum for exports remains a concern as it may cast a shadow upon the economic recovery, particularly given the less-than-robust outlook for domestic demand".

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Published: 17 Apr 2015, 06:07 PM IST
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