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Last updated: 16 Oct, 2018  

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Bikky Khosla | 16 Oct, 2018

Merchandise exports declined by 2.15 percent in September on a year-on-year basis, according to figures released by the Ministry of Commerce and Industry on Monday. It happened despite the ongoing sharp depreciation of the Rupee. On the other hand, trade deficit for the month registered its lowest in last 5 months despite the currently high global crude oil prices. So, what do these conflicting scenarios imply as far as our overseas shipments are concerned?

The Commerce Ministry claims that the fall in September y-o-y exports is due to base effect as exports showed an increase of 26 percent in September last year. The aggregate value of exports in this month, which stood at USD 27.95 billion, is still much more than in the month of April, June and July this year. So, the commerce ministry’s argument sounds logical, but still it is difficult to overlook another aspect of this development that the sharp fall in rupee value has not helped exporters much.

Second, trade deficit narrowed to a five-month low of $13.98 billion in September despite higher oil prices. This decline in imports seems to be affected by seasonal factors and therefore offers only temporary relief. Also, even though sharp depreciation of the rupee may positively impact exports in certain sectors and the Centre's already unveiled measures to curtail non-essential imports may show some positive results in the coming months, it is unlikely that they will help much to improve the trade deficit scenario soon.

Meanwhile, an exporters' body last week pointed out some major challenges facing the sector. First, poor outlook of global trade due to growing trade tensions, rising crude prices and currency volatility. Second, poor flow of exports credit from the banking sector. Third, transaction time and cost involved in ITC refund system. Fourth, recent changes in CGST rule, making some exporters ineligible to claim IGST refund on exports. These issues require urgent attention from the Centre.

I invite your opinions.

 
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