Textiles, farm products drive export pick-up in August

Radhika Merwin BL Research Bureau | Updated on September 11, 2013 Published on September 11, 2013

The improvement has come more from a revival in demand in key importing countries, and from recent policy measures, than from the rupee’s depreciation.

Very few macro data points about India present a cheerful picture today, but export growth is certainly one. Trade data released on Tuesday showed merchandise exports increasing 13 per cent in August 2013, compared to a year ago, to $26 billion. That reduced the trade deficit and caused the rupee to perk up, too.

India’s product exports have now gone up for a second month in a row after posting year-on-year declines until June. In fact, the last time exports managed double-digit growth in dollar terms was 20 months ago.

So what contributed to the pick-up in exports? The base effect has helped to some extent, as exports actually declined 6 per cent in August last year. Exporters say the recent surge in exports has been driven mainly by textiles, agricultural products, pharma products and chemicals. The improvement has come more from a revival in demand in key importing countries, and from recent policy measures, than from the rupee’s depreciation.

Policy boost

A. Sakthivel, Chairman of the Apparel Export Promotion Council, said the government’s recent interest subvention scheme for exporters has boosted apparel exports.

“Demand in the US, UK and German markets has been picking up. Also, orders from neighbouring countries have seen an improvement. In addition to this, the government’s interest subvention scheme for exports at 3 per cent and other market focussed schemes have helped improve exports,” he said.

In fact, textile exports, which make up about 10 per cent of the export bill, have been showing steady improvement. They expanded 9 per cent from April-June 2013. Readymade garments fared particularly well, increasing by percent.

“Sectors such as textiles, pharma, chemicals, leather and even agriculture have driven growth in July and August.

However, sectors that continue to languish are engineering and gems and jewellery, which are yet to come into the positive zone,” said M. Rafeeque Ahmed, President, Federation of Indian Export Organisations (FIEO).

Market participants are optimistic that exports will grow at a higher pace from October onwards. “The second half of 2013-14 is expected to pan out better with growth scaling up further in the coming months. The government needs to support sectors which are still in the negative zone as well as continue to extend aid to sectors which have been performing well in the last few months,” said Ahmed.

The rupee’s depreciation against key currencies has also given exporters a competitive edge in several sectors. “As realisations are better now, exporters have been able to bag more orders by offering better pricing to the buyers. These order flows should help sectors such as engineering to see their growth pick up from October onwards.

If manufacturing picks up and infrastructure starts to improve, we can expect a growth of 15 per cent in 2013-14,” said Walter D’Souza, Chairman of FIEO, Southern Region.

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Published on September 11, 2013
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