Shipments log double-digit growth in India
December 30, 2013 - 9:58:29 am
New Delhi: Indian shipments logged double-digit growth in the second half of 2013, lowering substantially the current account deficit, a big worry for the Indian policymakers, and boosted hopes of revival in the economy.
Due to sluggishness in the global economy, notably Europe and the US, India’s merchandise exports growth was mostly in the negative zone in the first half the year.
However, since July it has seen a significant turnaround and registered a healthy double-digit growth, except in November, when the shipments were affected by strikes at ports.
In July, exports jumped 11.64 percent after declining by 4.56 percent In the previous month year-on-year.
The good show continued and the growth surged to a two-year high of 13.47 percent in October. A sharp depreciation in the value of the rupee during that time helped in growth in shipments, which helped the sluggish economy.
The country’s gross domestic product (GDP) expanded by 4.8 percent in The July-September quarter as compared to 4.4 percent growth posted in the previous quarter.
“Indian exports is leading the economy from the front contributing to 70 percent of the growth of GDP in the July-September quarter,” Federation of Indian Export Organisation (FIEO) President M Rafeeque Ahmed said.
Also, the country’s trade deficit came down significantly in the second half of the year helped by higher exports and lower imports.
The trade deficit, difference between exports and imports, declined to $6.8bn in September from the high of $20.1bn registered in May.
For the first eight months of the current financial year, the deficit declined to $99.9bn from $129.2bn recorded in the corresponding period of last year.
Ahmed said the deficit is expected to remain in the range of $140-150bn for the financial year ending March 2014 as compared to $190.90bn registered in the previous year.
“The first eight months of this fiscal has witnessed a nearly 23 percent decline in the cumulative trade deficit, which will considerably ease the pressure on the current account deficit and in turn make the rupee more stable,” said FICCI President Naina Lal Kidwai.
The value of India’s merchandise exports was $203.98 billion in the April-November period of 2013, as compared to $191.95bn in the corresponding period last year, registering a year-on-year growth of 6.27 percent.
However, imports in the first eight months of the current fiscal declined by 5.39 percent to $303.89bn as compared to $321.19bn recorded in the same period last year.
The lower trade deficit has helped curb the current account deficit that had spiralled to a record high of $88.2bn or 4.8 percent of the country’s GDP in the financial year ended March 2013.
The current account deficit dropped to $5.2bn or 1.2 percent of GDP in the July-September quarter of the current year, 75 percent lower from $21bn or five percent of GDP, recorded in the corresponding quarter of last year.
Soumya Kanti Ghosh, chief economic adviser at the State Bank of India, said India’s current account deficit is expected to come down to $40bn or 2.2 percent of the GDP in the financial year 2013-14.
“The momentum in export growth is an encouraging sign, and we believe that this trend will be maintained, going forward, partly aided by a lower base and seasonal impact in the last quarter,” Ghosh said.
Anupam Shah, head of the Engineering Export Promotion Council (EEPC), Said while the fall in trade deficit is a good development for the Indian economy, it is largely a result of a steep import compression rather than a smart rise in exports. Going forward, he said, the focus should be on boosting exports, instead of putting a curb on imports.
“We must reverse this trend and focus more on export growth than import compression. The India story should be led by export drive, and not reduced consumption at home,” the engineering export body chief said.
Imports have come down largely due to a series of steps taken by the government to lower gold and oil demands.