The steady slide in the Indian rupee against the US dollar notwithstanding, India’s merchandise exports slipped into the negative zone for the first time this financial year, declining 2.15 per cent in September this year on an annual basis, government data Monday showed.
The dip in exports has been attributed to a correction on account of the base effect and seasonal factors. Imports, however, went up by 10.45 per cent in September.
“This decline is entirely due to the base effect resulting from September 2017 being an abnormally high growth month of about 26 per cent due to imminent cut off then for drawbacks at pre-GST rates,” the Commerce Ministry stated in its official release adding that it is a temporary, out of trend phenomenon.
“Exporters continue to be resurgent with their realised incomes having gone up by almost 10 per cent. October 2018 figures promise to be as per the ongoing six-month trend again,” the ministry statement said.
India’s trade deficit meanwhile narrowed to $13.98 billion in September from $17.4 billion in August despite high oil prices. September’s merchandise trade deficit figures are the lowest in the last five months. During the April to September period of this year, the merchandise exports exhibited positive growth of 19.93 per cent in rupee terms and 12.54 per cent in dollar terms.
On the fall in merchandise trade deficit, Aditi Nayar, principal economist, ICRA stated that the decline to $14 billion in September 2018 from $17-18 billion in the previous three months was driven by seasonal factors and is largely in line with ICRA’s estimate.
“The merchandise trade deficit recorded a sharp year-on-year deterioration to $14 billion in September 2018 from around $9 billion in September 2017, in line with the absolute widening seen in August 2018. This underscores that the correction in September 2018 relative to the size of the trade deficit in the previous three months, has been driven by seasonal factors, and is therefore likely to offer only temporary relief,” Nayar said.
“The decline in India’s merchandise exports by 2.15 per cent in September 2018 in dollar terms shows that the rupee depreciation has not been of help in so far as the competitiveness of our shipments is concerned. We continue to bear the high cost of raw material and interests, besides the uncertainties building around the tariff war between major economies of the world. Engineering Export Promotion Council (EEPC) of India would like to work with the government in devising a strategy to scale up the country’s exports on a sustainable basis,” said EEPC India chairman Ravi Sehgal.