India’s merchandise exports rose 37.5% to $246 billion (nearly Rs 11 trillion) in the year to 31 March, exceeding the government’s target, after data for the last four months was revised. Exports by the engineering sector contributed one-fourth of total exports, amounting to $60.1 billion, growing 84.8% from the year before.
The government had initially set a target of $200 billion for the fiscal year given the uncertain global growth scenario and later revised it to $225 billion. However, a recovery in global demand and the diversification of markets by exporters to emerging economies helped India perform better than expected.
Commerce secretary Rahul Khullar said the extent of diversification will only be known when the geographically segregated data comes in June.
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Export growth was “beyond expectation”, said Ramu S. Deora, president of the Federation of Indian Export Organisations. “The diversification strategy is paying off, and we are set to reap dividends in the near future,” Deora said. “Asia, Latin America, the Caribbean and Africa are the main contributors to this growth.”
The signing of free trade agreements with Asian countries is all set to raise their share in exports to 55% by 2014, he said.
The commerce ministry aims to double exports to $450 billion by 2013-14, it said in a draft strategy paper released in February. Khullar said a final version of the paper will be issued in 10 days and targets may need to be revised, given the robust export performance.
Commerce minister Anand Sharma said the new trade agreements signed by India will make a significant contribution to export growth.
Exports were at $208.2 billion till February this year, while in March overseas shipments added $29.1 billion. Khullar said the additional $9 billion was due to the revision in data for the last four months of the year.
Imports were at $350.3 billion for the full fiscal, which led to narrower-than-expected trade deficit of $104.4 billion.
Khullar said import data will be revised within the next few days as the Directorate General of Commercial Intelligence and Statistics, which compiles trade data, is still putting together the “missing entries” due to a technical glitch in the government’s e-commerce portal.
However, even after revision, the trade deficit will remain within the range of $105-115 billion, he said.
The global oil price surge will not have a serious impact on the trade deficit because Indian companies had signed contracts for crude oil at $70-75 per barrel, he said. Oil imports rose 16.7% to $101.7 billion during the year.
Khullar said India’s current account deficit will not be 3.2% of gross domestic product (GDP) as projected by the International Monetary Fund. “It will be well below, in the range of 2.5%-2.7% of GDP,” he said.
During the first 11 months (April-February) of the fiscal, foreign direct investment (FDI) inflows into India were $25.95 billion, compared with $37.76 billion a year ago, Sharma said. Fresh investment inflows during the year stood at $18.3 billion compared with $24.6 billion the previous year.
Sharma said the Reliance Industries Ltd-BP Plc deal, which will see $7 billion of FDI inflows, is “probably the single largest FDI into any emerging market”. He said the Essar Group-Vodafone Holdings Plc ($5 billion) and Pohang Iron and Steel Co. (Posco) deals are also expected to further add to India’s fresh FDI inflows.
Top grossers in exports, apart from engineering goods, are petroleum products ($42.5 billion), gems and jewellery ($33.5 billion), and textiles ($21 billion). Apart from petroleum products, the top grossers in imports are gems and jewellery ($28.2 billion), gold ($36.8 billion), machinery ($27.2 billion) and electronics ($21.7 billion).
The Asian Development Bank has projected India’s exports growth to moderate to 26.7% and imports to grow at 24.2% in 2011-12 on account of lower external and domestic demand.
Graphic by Ahmed Raza Khan/Mint