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India's merchandise exports are likely to grow slowly in the coming months, the Economic Survey has warned. This will be due to the general fall in world trade activity and the Euro zone crisis.
Import growth may moderate with oil prices still above the $100/barrel mark and high gold prices, it said.
Though India has successfully diversified its markets with reduced dependence on the EU and the US, Europe still has a 19.5 per cent share in India's exports, the Survey pointed out. “Besides, some of India's trading partners are dependent on Europe, thus affecting India's trade indirectly,” it said.
Slowdown in services
On the services front, the Survey said, software exports may show some sluggishness. This is again mainly due to the Euro zone problems. While the US accounts for nearly 60 per cent of India's software exports, the EU economies account for around 30 per cent.
Business services (comprising many services) have already declined in the first half of this year (2011-12) and there are no signs of this getting better, the Survey said.
Surplus in export of services may be squeezed in the last two quarters of 2011-12 if subdued growth prospects continue in the US and the EU economies, it said.
Significantly, the Survey said, “The decelerating growth rates of exports in goods and services coupled with only a moderation in growth rates of imports of goods and services could, therefore, strain the balance of trade in goods and services.”
Merchandise trade deficit during April-January 2011 was already at an all time high of $148.7 billion — a phenomenon not witnessed even during or in the aftermath of the 2008 global crisis, it said.
Also, concerns have increased on the bilateral trade deficit front with India's high and growing trade deficits with countries such as China and Switzerland, it added.
On the challenges, the Survey warned, “If the global situation worsens, the pressure for stimulus measures could again resurface and protectionist measures from trading partners could increase.”
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