Exports contracted for the eighth straight month, shrinking 10.30 per cent in July on back of a weak global demand and a raising concern among exporters who are under pressure due to China’s recent move to devalue yuan.
During the month, exports stood at $ 23.13 billion compared to $ 25.79 billion during July 2014, while imports contracted 10.28 per cent to $ 35.94 billion as compared to $ 40.06 billion during the same period a year ago. The resultant trade deficit stood at an 8-month high of $ 12.81 billion, according to the data released by the commerce ministry.
Outbound shipment witnessed a decline as export of petroleum products dipped 43.22 per cent; leather and leather goods by 10.15 per cent; marine products 17.6 per cent; electronic goods 8.51 per cent; and chemicals by 6.22 per cent.
“It is matter of concern as the decline is continuing. But going for the figures of 10 days in August, we are expecting a little turnaround in August. From September, there will be the impact of base effect,” S C Ralhan, president, Federation of Indian Export Organisations (Fieo) said. Exports were last positive in November, when it grew 7.27 per cent.
Ralhan said that the main reason for the continued decline include low prices of crude, metal and commodity, dip in manufacturing growth and slowdown in western markets.
The development is also a cause of concern as it comes amid China devaluing its currency, yuan, which has already put exporters under pressure.
Expressing his concern, Arvind Subramanian, chief economic adviser to the finance ministry said, “There is some amount of volatility in
international forex markets following the Yuan devaluation and we (in India) are feeling some repercussion from it. But prospects of the economy are very bright as fundamentals are very sound.”
According to India Ratings, Chinese demand for Indian goods is likely to contract further due to the decline in the overall demand in the world’s second largest economy.
What is a greater cause of worry is the fact that a weaker yuan may encourage other central banks in the region to devalue their currencies to stay competitive. Also, the devaluation will help increase the competitiveness of Chinese exports.
Meanwhile, the commerce ministry will soon seek the cabinet’s nod for Rs 500 crore project development fund to start investments in Cambodia, Laos, Myanmar and Vietnam (CLMV).
“We already have the approval of the programme. We are taking it very shortly to the Cabinet and I hope that in a matter of weeks, we will have the approval of the Cabinet to initiate the work in the CLMV region,” Commerce Secretary Rita Teaotia said here at a function.