New Delhi: Indian exports in February provisionally rose by a half, the fastest in 11 months, and the trade secretary forecast Asia’s third-largest economy to improve on its targets for overseas sales and current account deficits.
Exports rose to $23.6 billion in February, powered by engineering goods, petroleum products and electronics, and were on track to hit up to $235 billion in the year to end-March, Rahul Khullar told reporters on Thursday.
The surge could help guide the country’s current account deficit (CAD) to 2.5-2.8% of the GDP in the year to end-March, Khullar said, a figure narrower than the central bank’s projection of 3.5%, which many officials warn is not sustainable.
A widening trade deficit in India, coupled with declining foreign direct investment, had sparked worries of a pressure on payments and risked making the country more reliant on foreign capital inflows to plug the CAD.
“The export growth figures for February do look encouraging. But we need to wait for a little more time before drawing any conclusion for the future as the global recovery still remains at its early stage,” said Siddhartha Sanyal, a Mumbai-based analyst with Barclays Capital.
“Looking at these numbers, it looks like trade deficit will be lower than anticipated this year.”
Chasing Export Growth
Khullar said the trade deficit in February stood at $8.1 billion, while imports were at $31.7 billion. The figures compared with January’s trade deficit of $8 billion and imports of $28.6 billion.
Recent restrictions imposed on the export of iron ore, onions and cotton dented import growth in February.
The trade secretary released the figures ahead of their official release next month, and stressed the data could change.
India had an initial $200 billion export target for the fiscal year 2010-11. It aims to double its merchandise exports within three years to match its growing economic heft and lift its exports to an annual total of $450 billion by 2013-14.
But a recent trade ministry document raised “serious concerns,” showing the trade deficit could widen to 12.8% of the GDP by then, from 7.2% this year.
Last month, commerce minister Anand Sharma floated a series of possible measures to accelerate the growth of Indian exports, from moving car manufacturing up the value chain to a PR campaign to promote the quality of Indian products abroad.
The measures were outlined in a draft policy document for India’s trade in the coming years which will be released around the start of the new financial year on 1 April.
Already an IT and service sector powerhouse, India wants to give a huge push to its manufacturing sector to diversify the economy and provide jobs for tens of millions expected to enter the workforce.
Khullar said the country had to press its advantage on certain sectors in which exports had shown impressive growth.
“Engineering has done remarkably well,” he said.
“In the next 3-5 years, India has to look to capitalise on its engineering and chemicals industries.”