India’s exports continued the dismal performance in May falling for the sixth straight month, according to a report released by the Ministry of Commerce and Industry. Data for May showed exports at $22.35 billion, a 20.19 per cent drop in dollar terms from May last year. The value of exports although was a tad bit higher compared with April but the decline was much more in dollar terms compared with last year. In rupee value, exports declined by 14.14 per cent over last year.
India had a dismal trade balance last year as exports declined further missing the target set by the government and the trend for this year appears to be no exception. Cumulatively for April-May, exports came in at $44.40 billion, registering a negative growth of 17.21 per cent in dollar terms.
“The US dollar/Indian rupee has been on a general uptrend since 2011, when exports flattened into a range. Hence, it is a concern that exports are threatening to set new lows below this range; in which case, it could weigh on the rupee,” wrote analysts at DBS in a research note on Tuesday while setting a target of Rs 65.6 against the dollar for end-2015.
While trade balance has suffered due to contraction of exports of high value added items such as engineering and electronic goods, a major cause of concern has been the depreciation of rupee which has eroded the value of exports.
Imports also depreciated 10.19 per cent in dollar terms. Oil imports during the last month were valued 40.97 per cent lower than the corresponding period last month while non-oil imports for the April-May period increased 4.86 per cent higher in value. Non-oil imports during May 2015 were estimated at $242.21 billion lower than the $256.04 billion estimated in April.
Trade balance for May softened given the lower gold imports and the decline in value of net oil imports. Report highlighted trade deficit for April-May, 2015-16 was estimated at $ 21.40 billion which was higher than the deficit of $ 21.32 billion during April-May, 2014-15.
With the crude prices on the rise again and rupee slumping against the dollar, value of imports is expected to increase with no sign of recovery in exports. This poses a problem for the government which will have to ramp up its efforts to increase exports and also keep inflation in check.