By Kartik Goyal and Cherian Thomas/ Bloomberg
India’s exports in March grew at less than half the pace of the past year as a rising rupee hurt earnings from overseas sales of textiles, steel and other goods.
Exports rose 8.8% to $12.6 billion in the month compared with a 21% increase in the year ended 31 March, the Ministry of Commerce and Industry said in a release in New Delhi on 1 May. Exports gained 7.9% in February.
India’s central bank has allowed the rupee to appreciate 7.2% since March to make imports cheaper and contain inflation, which has stayed above its target for more than seven months. Exports, which make up about 12% of India’s $854 billion economy, may slow further as the rupee had its best month in April since February 1973.
“Export growth in the current year will slow to about 10%,” said D.H. Pai Panandiker, president of the RPG Foundation, an economic policy group in New Delhi. “The government’s export target for the year is optimistic.”
Commerce and Industry Minister Kamal Nath said on 19 April that he expected exports to grow 28% to $160 billion in the year that started 1 April.
The rupee appreciated 1.7% in March and sustained its rise in April, closing at a near a nine-year high of 41.17 yesterday. India’s currency has risen as foreign investors have boosted holdings in local stocks.
Reserve Bank of India Governor Y.V. Reddy, who has raised interest rates for two and a half years, is relying on a stronger currency to help ease prices in the economy.
India’s key wholesale price inflation remained unchanged at 6.09%, near a two-year high, in the second week of April, staying above the central bank’s target of 5% since September.
The export target for the current year is “too ambitious to achieve in the backdrop of sharp rise in rupee value and emerging slowdown in the global economy,” the Associated Chambers of Commerce and Industry of India said in a report on 30 April.
India’s trade deficit widened to $3.7 billion in March as imports rose 14.4 percent to $16.4 billion, the ministry said.
Oil imports in March rose 9.4% to $4.5 billion, while non-oil imports rose 16.5 % to $11.7 billion, according to the statement.