The continued pickup in exports for the fifth continuous month, with flows going up by 4.3% in January 2017, indicates that the fall in global trade in recent years has finally bottomed out. India’s exports had also been badly hit by the international trends with exports declining for 18 consecutive months till May 2016. Though things have improved in the fiscal year 2016-17 with exports registering positive growth in 6 of last ten months the cumulative growth of exports in the fiscal year is still a marginal 1.1%.
However, this is a notch better than the global trends where exports have turned positive in 3 of the last nine months with steady growth happening only in the last two months. And the global exports pick up was only 3.3% in December which is significantly lower than the pickup in Indian exports during the month. An international comparison reveals that the pickup in exports of other competing nations like China is slower than that of India. However, oil prices seems to have significantly boosted up exports of Russia and Brazil.
The pickup in India exports has been accompanied by a more buoyant increase in imports with inflows going up by double digits in two of the last four months. But despite buoyant imports in recent months the trade deficit has been contained at $86 billion in the first ten months of the year which is significantly lower than the $107 billion touched in the corresponding period of the previous year. The ratio of trade deficit to exports is still down in 39%, which is one of the lowest in recent years.
It is an optimistic scenario as most of the large exports sectors are doing well. This is especially so of the largest two namely engineering and petroleum products where growth is in double digits in January. Exports of chemicals and ready made goods are also growing at 4.8% and 2.1% respectively. However, some important exports like gems and jewellery and drugs and pharmaceuticals have declined by 4.5% and 11.6% respectively.
On the imports side the reason for worry is the surging oil import bill which has bloated by as much as 61% in January. Strangely despite the increase in domestic supply coal imports have also gone up by 47% in the months indicating that imports are cheaper at least in the coastal states. Numbers on imports of machinery and transport equipment are also encouraging as domestic demand seems to be picking up. Equally encouraging is the fall in imports of gold and silver whose inflows have declined by a third in the most recent month.
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