Merchandise exports fall for 12th straight month in November

New Delhi: India’s merchandise exports contracted for the 12th straight month in November, as a weak global recovery reduced demand for goods from Asia’s third largest economy.

Indian exports fell by 24.4% in November, dropping to $20 billion mainly on account of a sharp fall in shipments of petroleum products, engineering products, gems and jewellery and oil meals. Exports had contracted by 17.5% the previous month.

Imports also fell sharply by 30% in November to $29.7 billion, led by a fall in both oil and non-oil imports. Almost all categories of imported items, excluding pulses, fruits and vegetables and electronic goods, saw a contraction in November.

While oil imports shrank 45% to $6.4 billion in the month mainly on account of the falling crude prices globally, non-oil imports were down 25% to $23.3 billion, reflecting the weak demand in the domestic economy as well.

Gold imports contracted 36.5% to $3.5 billion and silver imports were down 55% at $285 million. Other major imported items that saw a sharp contraction in November include coal, raw cotton, fertilizer, iron and steel and pearls and precious gems.

In October, imports had fallen by 21%.

The steep fall in imports ensured that the trade deficit narrowed to $9.7 billion, data released by the commerce ministry showed.

In the first eight months of this fiscal year, while exports have fallen by 18.4%, imports have contracted by 17%.

The International Monetary Fund (IMF), in its world economic outlook released in October, had flagged the weakening of global demand and the consequent impact on Indian exports as one of the main reasons for lowering the country’s growth outlook.

The IMF had marginally lowered India’s growth outlook to 7.3% for 2015-16 from 7.5% in its earlier forecast while observing that though domestic demand remains resilient, global developments are going to have an adverse impact on India.

Last week, acknowledging the sharp fall in Indian exports due to weak global demand, commerce minister Nirmala Sitharaman had expressed hope that exports will soon pick up on account of measures announced by the government.

“We have given support under Merchandise Export India Scheme. We have also announced the interest subvention scheme. So there should be an improvement on our exports soon,” she had said.

Crisil Ltd, in a note dated 15 November, said that India’s target of doubling exports of goods and services to $900 billion by fiscal 2020 from $470 billion in 2014-15 might prove a tad too ambitious if the current cyclical slowdown lasts and structural issues are not addressed.

“While exports are likely to remain weak because of subdued global growth—especially when there is structural weakness in trade—imports would rise as domestic demand and investments pick up and commodity prices stabilize. That would bloat trade deficit again,” the note said.

“Export destinations are not doing well, prices of many export items have fallen, and the rupee, too, has appreciated in real terms against a basket of 36 currencies,” Crisil said while warning that decline in exports isn’t merely cyclical, but that there are structural reasons too.