SME Times News Bureau | 23 Dec, 2015
Ministry of Commerce and Industry Tuesday said that for the
issue of recent decline in country's exports, there is no cause for panic
excluding petroleum and gems and jewellery, no significant decline in India's
exports.
In a press release, the ministry said, a general sense of alarm has been generated by the publication of
figures of India's exports in recent months. During the period April-November
2015 total exports in dollar terms were USD 174.3 billion which shows a decline
of 18.5 percent over corresponding period figure of USD 213.8 billion in 2014.
Ironically, the latest Index of Industrial Production (IIP) figures for October
2015 show considerable growth at 9.8 percent over the previous year. For the
cumulative period April - October 2015 growth in IIP was 4.8 percent, more than
double the growth recorded (2.2 percent during April - October 2014) in
corresponding period during 2014.
A closer look at the trade figures gives a satisfactory explanation for
divergence in these figures. Petroleum product exports have fallen by 52
percent. In the case of petroleum products, there has been steep decline in raw
material prices, namely, crude oil. If exports of petroleum products are
excluded, then the decline in exports is only 9.6 percent in dollars. In rupee
terms non-oil exports have declined by only 3.7 percent. Similarly, export in
gems and jewellery sector have fallen by 9.5 percent. In this case also there
is a significant decline in raw material price, namely, gold. Hence the
declines in exports in these categories are a reflection of changing import
prices.
Decline in non-oil & non-gems and jewellery export for the reporting period
is 9.7 percent in dollar terms and only 3.7 percent in rupee terms. Thus the
basic picture emerging is that excluding petroleum and gems & jewellery,
India's exports have not declined significantly. While several sectors have
shown declines, some have shown increases e.g. ready-made garments of all
textiles, carpets, handicrafts, jute manufacturing, drugs and pharmaceuticals,
ceramic products & glassware, tea, cereal preparations & miscellaneous
processed items. Indeed, the nominal decline must be compared with the rate of
inflation. For the purpose of measuring the real value of exports which are
essentially wholesale transactions, it is the WPI rather than the Consumer
Price Index which is more relevant. When the export figure in rupees is
compared with the average negative WPI inflation rate of (-) 3.3 percent, the
fall in exports in real terms is likely to be negligible in volume terms.
The fall in exports has to be viewed in the context of sluggish global trade
volumes. If the drop in export is resulting in increased current account
deficit or/and reduction in growth of GDP then there could be a need for alarm.
The Current account deficit is down to 1.2 percent of GDP from the alarmingly
high level of 4.8 percent of GDP in 2012-13 and the rupee has gone from being
one of the worst performing currencies to one of the best performing currencies
against the dollar during the current financial year.
Even though contribution of exports in GDP has declined from 25.2 percent in
2013-14 to 21.2 percent in the first half of 2015-16, the growth in GDP in H1
of current financial year at 7.2 percent is higher than the growth of 6.6
percent recorded during 2013-14. Thus the drop in export has not reduced the
pace of growth in the economy and it has been compensated by domestic demand.
An example of this is Engineering Goods: exports have fallen by 14 percent in
dollar terms but IIP data for April - October 2015 for capital goods shows a
growth of 8.9 percent.
In short, there is no crisis in India on the export front and while there is a
need for caution, there is no need for alarm.