Home / Politics / Policy /  India’s exports shrink 0.3% to $21.5 billion in August

India’s merchandise exports contracted by 0.3% to $21.5 billion in August for the second consecutive month after expanding for the first time in 19 months in June.

Growth in shipments by labour-intensive sectors such as gems and jewellery, ready-made garments and engineering goods prevented a steeper fall in August. A sharp drop in gold imports led to a narrowing of the trade deficit.

Data released by the commerce ministry showed imports shrank 14.1% to $29.2 billion in August, leaving a trade gap of $7.7 billion in the month.

The overall trade balance, including merchandise and services trade, in April to August improved with a combined trade deficit at $13.1 billion—63.6% lower than the same period a year ago.

China’s exports slid 2.8% and imports grew 1.5% in August.

Shipments of 14 of the top 30 items in India’s export basket grew in August. Exports of gems and jewellery (7.6%), pharmaceuticals (0.7%), engineering goods (4.21%) and ready-made textiles (3.7%) increased, while those of petroleum products (-14.8%), chemicals (-4.9%) declined.

Shipments of 14 of the 30 top import items increased in August. Among the major items, chemicals (7.9%), plastics (12.1%), pearls and stones (45.4%) and electronic goods (6.3%) increased. Imports of coal (-0.9), petroleum (-8.5%), machinery (-2.1%), transport equipment (-24.1%) and gold (-77.5%) declined.

The decline in exports has largely been arrested, said S.C. Ralhan, president, Federation of Indian Export Organisations, adding that he hopes growth in outbound shipments will turn positive soon to reach around $280 billion in 2016-17.

Ralhan said the rupee’s value should be allowed to be set by market forces so that Indian exporters can compete effectively with countries whose currencies have depreciated significantly in the last one year or so.

“Rupee depreciation is one of the important factors in pushing exports but not the sole factor. Other issues such as high logistics cost, high cost of credit and high transaction cost also needs to be addressed..," he added.

A CNBC-TV18 report that the government is contemplating a devaluation of the rupee sent the Indian currency to a two-week low despite the finance ministry clarifying that it does not have any such plans. India’s external profile is expected to improve in the June quarter. The current account is likely to swing to a $3.3 billion surplus in the April-June quarter, its first since 2007, according to the median of 10 economist estimates in a Bloomberg survey. The data is expected to be released by the Reserve Bank of India this month. A stronger external profile stands to boost Asia’s second-worst performing currency, making it a safer option for global funds seeking higher yields.

World trade has been shrinking as demand slowed in key American and European markets. Growth in the volume of world trade is expected to remain sluggish in 2016 at 2.8%, the same as in 2015, the World Trade Organization said in an April report.

The government’s earlier target of $900 billion in exports of goods and services by 2020, raising the country’s share in world exports to 3.5% from 2% now, looks more daunting. The Economic Survey released before the budget in February said even though India’s long-run potential Gross Domestic Product (GDP) growth is 8-10%, its actual growth in the short run will also depend on global growth and demand.

“After all, India’s exports of manufactured goods and services now constitute about 18% of GDP, up from about 11% a decade ago," it added.

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