The Hindu Business Line : MacroTracker

The unprecedented rise of the rupee, the US slowdown, soaring commodity prices in the international markets and stiff domestic interest rates have all left an indelible mark on India’s foreign trade in the eleven months ended February 2008.

Exports

In dollar terms, five of the eleven months until February recorded an export growth of over 20 per cent, year-on-year. The remaining six months are not too far behind, clocking 14-16 per cent growth, y-o-y. Cumulatively, exports grew almost 23 per cent in the eleven months.

The rise in petroleum exports, fuelled by the surge in international prices, has been a major contributor to this performance. Export growth was also driven by gems and jewellery, products of metals, iron and steel bar/rods, iron ore and non-basmati rice, all helped by soaring food, gold and steel prices in the global markets.

But the disaggregated data until November 2007 show that exports to the US have taken a hit this year, growing less than 9 per cent in the first eight months, against 12.5 per cent for the same period in 2006. Although export growth in dollar terms presents a rosy picture, given the pace of rupee appreciation last year, in rupee terms, India is all set to close 2007-08 with a year-on-year export growth of below 10 per cent, as cumulative export growth for April 2007-February 2008 stands at a lacklustre 9 per cent.

Imports

In dollar terms, cumulative imports in the April-February period were 30.2 per cent higher than the previous year. But a breakdown of monthly growth in imports shows no particular trend, fluctuating from a high of 63 per cent growth in January 2008 to a low 0.8 per cent in September 2007. A reason for the high growth witnessed in January was that, POL (Petroleum Oil Lubricant) imports, which account for 30 per cent of the total imports, saw a 61 per cent y-o-y growth, driven by the peaking crude prices.

Similarly, a sharp fall in POL imports, coupled with a high base in gold, wheat, metalliferrous ores and metal scrap, could have caused the fall in September 2007 imports. Disaggregated import data (until November 2007) reveal that capital goods, chemicals and related products, vegetable oils (edible), pearls, precious and semi-precious stones too have helped the overall growth in imports.

Deficit widens

The surge in imports in dollar terms has widened the trade deficit (difference between exports and imports) by almost 50 per cent relative to April-February period last year. This in itself could exert downward pressure on the rupee.

PARVATHA VARDHINI C

More Stories on : Foreign Trade | Economy

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page