‘India’s exports slide due to rapid fall in petroleum exports’

The continuous fall in crude oil prices in the international market, reduced India’s burden of oil imports, but the country’s trade deficit widened due to more rapid fall in petroleum exports.

Himanshu Vatsa | The Dollar Business Declining Exports Declining value of outbound petroleum as well as gems and jewellery products from India led to reduction in the country’s overall exports in the past five months, an apex body of exporters said. According to the latest data released by the Commerce Ministry, India’s total exports contracted to US$ 22 billion, registering a fall of 14% in April this year as compared to the level of US$ 25 billion during the same month in 2014. Although the percentage drop has reduced from 21% recorded in March, Indian merchandise exports have been witnessing negative growth since December 2014. “The prime reason continues to be softening of crude, metal and commodity prices. Petroleum exports is still showing a decline of 46.5%, which itself is responsible for an overall decline of 9%, as the sector used to contribute to 20% of country’s exports,” said S.C. Ralhan, President of the Federation of Indian Export Organisations (FIEO). In addition to the steep fall in petroleum exports, the negative growth in key export sectors such as agriculture, dairy and poultry products is equally worrying. In April, the export value of India’s petroleum products was reduced to US$ 2.7 billion from US$ 5.1 billion during the same month last year. Ralhan said, even though the exports of rice, marine products, meat and leather have shown promising results in the past, declining shipment value of these items is a major concern. “Equally worrying is negative growth in gems and jewellery, electronics and plastic goods as domestic capabilities are being augmented in these sectors,” he added. The continuous fall in crude oil prices in the international market reduced India’s burden of oil imports by more than 7% However, the country’s trade deficit widened marginally from US$ 10 billion in April last year to around US$ 11 billion this time due to rapid fall in petroleum exports. According to the government data, the country’s total imports have reduced 7.48% to US$33 billion from US$ 35 billion in April last year. Of them, oil imports were valued at US$ 7 billion, 42.65% less than the value of the corresponding month a year ago. Increase in gold imports was a major contributor to the country’s trade imbalance. India’s gold imports increased to US$ 3.1 billion in April, more than 78% from US$1.7 billion in the same month last year. Giving a sigh of relief to the widening trade deficit, exports of engineering goods, handicrafts, carpets, pharmaceuticals, and organic and inorganic chemicals recorded a positive growth in April. Experts say that Indian policy makers need to analyse non-oil imports more closely as higher imports of raw materials and capital goods may indicate little revival in manufacturing. “Our exports to countries dependent on oil, metal and commodities exports may have taken a hit as they reduced their appetite for imports with tighter capital control,” said Ralhan. To address liquidity crunch faced by Indian exporters, the FIEO president suggested the government to enforce the interest subvention scheme under which exporters get bank credits at cheaper interest rates for a certain period. “The interest subvention scheme may be re-introduced immediately and liquidity crunch of the exporters may be addressed with timely release of the exports benefits,” Ralhan said.