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
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
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.