Exports to fall short of revised target for FY14

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Imports contract in double digits, trade deficit narrows

Export growth contracted by 3.67 per cent in February on the back of a huge trade deficit of $128 billion in 11 months this fiscal, belying the UPA government’s claims of economic revival.

Exports at $25.68 billion last month, dashed hopes of achieving the revised export target of $325 billion for the full financial year.

Overall, exports were up 4.79 per cent at $282.7 billion in the 11-month period of April-February, 2013-14, according to official trade data released on Tuesday.

Imports fell 17.09 per cent to $33.81 billion in February, narrowing the trade deficit to $8.13 billion. But, the 8.65 per cent drop in imports during the 11-month period to $410.86 billion has not helped the government contain the overall trade deficit.

Worse, after discounting the strong base effect, export growth was negative in February.

Independent rating agency Crisil attributed the less-than-impressive export performance to continued fall in the value of petroleum shipments, as crude oil prices averaged lower at nearly $109 a barrel in February compared with $116 a barrel same time last year.

Imports recorded the sixth consecutive month of double-digit contraction (falling 17.1 per cent year-on-year) in February. This contraction was driven by weak domestic demand and restrictions on gold imports that hastened the drop in non-oil imports to 24.5 per cent year-on-year.

Growth in oil imports slowed to 3.1 per cent from 10.1 per cent last month.

Merchandise exports fell for the first time in eight months in February, signalling that the country may miss its annual exports target for the second straight year.

Several months of rising exports have helped India bring down its current account deficit to a manageable level, and despite the weaker data for February, it is likely to beat last year’s $300 billion worth of merchandise exports.

“The momentum of export growth has been lost when we were about to reach the final goalpost,” said Anupam Shah, chairman of the engineering goods exporters’ body EEPC India. “At this rate, there is no way we can achieve the target of $325 billion in the current financial year.”

The current account deficit narrowed to $4.2 billion, or 0.9 per cent of the gross domestic product, in the December quarter, from 6.5 per cent or $31.9 billion a year earlier. Trade deficit during the first 11 months of the financial year declined by more than $51 billion from a year ago to $128 billion.

Oil imports declined 3.1 per cent in February to $13.69 billion. Gold and silver imports declined 71.4 per cent to $1.63 billion in the same month, mainly due to restrictions imposed on gold, including a 10 per cent import duty.

Gold imports during April-February declined 41.47 per cent to $30.7 billion from $52.4 billion in the year-ago period.

Finance minister P Chidambaram expected the current account deficit to fall below $40 billion against projections of $70 billion at the beginning of this financial year.

Surprised by the poor exports showing in February, Fieo president M Rafeeque Ahmed said the numbers were below expectations and encouragement to manufacturing held the key.

The decline in exports is due to an amalgamation of factors such as sluggish manufacturing, contraction in global demand and restriction on current and capital accounts in a few Latin American countries, he said, adding that falling global commodity prices too contributed.

“We hope an industry-friendly foreign trade policy (FTP) is announced soon, which will help stimulate exports,” said Sanjay Budhia, chairman of the CII national committee on exports and imports.

Ficci president Siddharth Birla said, “Though over 40 per cent contraction in India’s trade deficit is a positive development, nearly 4 per cent dip in exports in February is worrisome.”

“The big picture on India’s external sector is marked by a sharp reduction in imports – a direct consequence of the slowdown rather than any breakthrough in exports,” Assocham president Rana Kapoor said.

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