June exports surge 10%, gold imports swell too

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India’s exports grew 10.2 per cent to $26.5 billion in June, the second consecutive month of double-digit growth, but a sudden spike in gold imports swelled trade deficit to $11.76 billion for the month.

For the April-June quarter, exports rose 9.3 per cent year-on-year to $80.1 billion and trade deficit stood at $33 billion. The deficit numbers are lower than those recorded for the corresponding month and quarter a year ago.

The surge in exports was attributed to a conducive situation for global trade, as stability returned to the euro zone and consumer demand improved in the US. Global trade is expected to grow at 4.5 per cent through 2014, which can further improve India’s exports in the remaining months of the financial year.

A 44.4 per cent growth in shipments of oil seeds, 38.4 per cent higher exports of petroleum products, a 32 per cent jump in exports of handicraft barring handmade carpets, and a 31 per cent rise in tobacco outgo largely helped June exports growth.

Among other key items were marine products (27.5 per cent growth), ceramics (25.4 per cent) and engineering goods (21.6 per cent).

“The sustenance of double-digit growth in exports is a positive sign. With the encouraging IIP numbers in May, I expect the performance to improve further in the months to come,” said M Rafeeque Ahmed, president of the Federation of Indian Export Organisations (Fieo)

In the Union budget last week, finance minister Arun Jaitley announced further steps to boost exports, which included extension of the 24 x 7 facility for all export promotional schemes.

A new foreign trade policy for 2014-19, likely to be unveiled over the next few weeks, is expected to focus on exports of high-tech electronic goods, branded items, project exports and services exports besides the traditional basket. “We should look for $750 billion exports by 2018-19,” Ahmed said.

India’s annual exports stood at $312 billion in 2013-14, way off the $500 billion target set for 2014-15 before the global financial crisis threw everything haywire. June data showed a trend reversal, as imports grew 8.3 per cent to $38.2 billion after contracting for an entire year from May 2013 till this May. However, for the April-June quarter, imports showed negative growth at 6.9 per cent.

India Ratings and Research said a notable change in June imports data was due to a 65.1 per cent year-on-year expansion in gold imports, which had been contracting for the past several months. While oil imports expanded 10.9 per cent, non-oil imports rose 7.0 per cent. India Ratings expects this trend to continue in the coming months, as the economy recovers. The total value of gold imports rose to $3.12 billion in June compared with $1.88 billion in the year-ago month.

Ficci president Siddharth Birla called for vigilance on trade deficit, which has already shot up to an 11-month high. This also means the 10 per cent hike in gold import duty to check imports and rein in current account deficit is likely to remain in force for some more time.

“Even though external sector risks have fallen with the narrowing of the current account deficit as a proportion of GDP to 1.7 per cent in 2013-14, it would be good to remain watchful in view of the uncertain global environment and rising crude prices,” Birla said.

Crisil said it expected CAD to widen to 2.2 per cent of GDP in 2014-15. “While exports growth is likely to gain momentum with the global recovery, imports too will rise as some of the restrictions on gold imports have been lifted and imports of oil and investment goods would pick up with the recovery in growth.”

A 21 per cent rise in engineering goods exports in June to $5.4 billion has come on the back of the fast improvement in the US economy. “We are getting good orders from the US, so much so that our domestic manufacturing infrastructure is not able to support the same,” EEPC chairman Anupam Shah said.

Engineering, gems & jewellery and textiles are some of the key exports sectors in the country. But problems like power outages and shortage in raw material and skilled labour are coming in the way of further growth, Shah said.


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