India’s outbound shipment contracted for the sixth month in a row, sharply declining by 20.19 per cent in May, pulled down by a fall in global demand and low commodity and oil prices. Imports too declined by over 16 per cent during the month, narrowing down the trade deficit to $10.40 billion compared to $10.99 billion in April. Concerned over the development, economists and trade experts said that the soft domestic demand and no visible pick-up in global demand indicates that a turnaround is not likely to happen anytime soon.
According to the data released by the commerce and industry ministry, exports in May stood at $22.34 billion as compared to $27.99 billion during the same period last fiscal, amid moderating oil, commodity and metal prices. The exports stood at $22.05 billion in April.
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Anand Rathi Financial Services said that “a turnaround looks some time away”, and the negative growth in the US, slowdown in China’s growth and only slight growth in the EU and Japan will impact the country’s export growth further.
Reacting to the sharp decline, the Federation of Indian Export Organisations (Fieo) cautioned that if the decline was not arrested, it will severely impact the economic revival. “Emerging economies particularly of Asia are also contracting due to slowing down of China. Also, Indian exporters are losing out their competitiveness due to high logistics cost and ground level transaction costs,” SC Ralhan, president, Fieo, said.
During the month, the worst performing sectors included exports of engineering goods, gems and jewellery, organic and inorganic chemicals, leather and leather products, electronic goods, petroleum and plastics and linoleum. While the petroleum exports declined over 59 per cent, gems and jewellery export declined -12.94 per cent and engineering goods contracted – 8.02 per cent.
HSBC India said in a statement that the even though the low global commodity prices are working in favour of the country, “the importance of commodity prices in explaining India’s export slowdown has fallen… while importance of other drivers such as domestic bottlenecks, weak global growth and a stronger Rupee may be rising.”
Manufacturing exports such as electronics and engineering goods were weaker, which we think is due to a confluence of sluggish external demand, loss in cost competitiveness and local bottlenecks which are eroding India’s export competitiveness. However, there were some positive signs as well with pharmaceuticals exports sustaining recovery,” HSBC said in a statement.
Combined exports of April-May stood at $ 44.40 billion as against $53.63 billion in the corresponding period a year ago, down 17.21 per cent.
On the other hand, imports, the data showed, was valued at $32.75 billion during the month compared to $39.23 billion in May 2014 while value of imports for the two month period in the current fiscal was $65.80 billion as against $ 74.95 billion during the same period last fiscal, shrinking 12.21 per cent. During May, oil imports declined 40.97 per cent at $8.53 billion compared to 14.46 billion in the corresponding period last year. Gold import, however during the month, jumped 10.47 per cent at $2.42 billion compared to $2.19 billion in the corresponding year-ago period.
Non-oil imports declined marginally by 2.42 per cent to stand at $24.21 billion as against $24.76 billion in May 2014 while in the two-month period it was valued at $49.81 billion, up 4.86 per cent higher year-on-year.