Exports climb but growth unlikely to sustain

US and European economies will affect growth rate

PTI | August 11, 2011



India's exports jumped by a record 81.8 per cent year-on-year to USD 29.3 billion in July, 2011, due to the sterling performance of sectors like engineering, petrochemical products and gems and jewellery.

However, this high growth rate is unlikely to be sustained in the coming months due to uncertainty in the US and European economies, commerce secretary Rahul Khullar said.

"Exports have done well... but my sense is that it (high export growth) is not going to sustain. It is simply not sustainable. We should see immediately by August-September growth rates slipping," Khullar told reporters here.

During April-July, 2011-12, overseas shipments of Indian products grew by 54 per cent to USD 108.3 billion.

Though most of the sectors posted robust expansion in export volumes, Khullar cautioned that the exporting community should not get carried away by these high numbers and should brace themselves as "summer is not over".

Uncertain economic conditions in the US and Europe are likely to hit global demand. Together, these countries account for about 35 per cent of the country's exports.

Imports, too, increased by 51.5 per cent to USD 40.4 billion, leaving a trade deficit of USD 11.1 billion.

During the first four months of the fiscal, imports grew by 40 per cent to USD 151 billion, led by inbound shipments of petroleum products worth USD 42 billion, an increase of 23 per cent year-on-year. The trade deficit during the period stood at USD 42.7 billion.

Commenting on the data, exporters' body Fieo said: "The growth of 81.8 per cent in exports is unheard of in recent history."

In July, India's engineering, petroleum products and gems and jewellery exports were worth USD 8.7 billion, USD 4.6 billion and USD 3.5 billion, respectively.

In July, imports of petroleum and oil lubricants stood USD 11.45 billion. Imports of pearls and semi-precious stones, gold and silver stood at USD 3.7 billion, respectively.

Fieo, too, said the high growth trend of exports is unlikely during the third and fourth quarter.

"The problem at the domestic front with hike in interest rates for exports and un-certainty over continuance of DEPB Scheme have further accentuated the problem," Fieo president Ramu Deora said.

Khullar also said that hike in interest rates are mainly hit small and medium enterprises. "People of SME sector have been complaining to me and that I am trying to do something on that."

During the April-July period, sectors which registered healthy growth in exports include engineering, petroleum products (60 per cent), readymade garments (40 per cent), electronics (84 per cent), chemicals (63 per cent) and plastics (51 per cent).

Export sectors which are not doing well during the period include tobacco, iron ore and fruits and vegetables.

During the period, pearls and semi-precious stones increased to USD 11.16 billion, machinery (45 per cent), electronics (75 per cent), chemicals (19 per cent).

On trade deficit, Khullar said that on an average monthly trade gap stood at roughly about USD 10.75 billion. Going by this, India's trade deficit may touch USD 130 billion in 2011-12.

"If you do not fix your balance of trade problem, you are going to have a difficult issue," he said.

Talking about demand in the new markets, he said that exports are registering good growth in new markets like in Latin America and Africa.

"In Africa, we are doing extremely well. Numbers are almost more than double," he said.

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