India’s External Sector Suffers the Brunt of Global Meltdown

The global recession has impacted India’s external demand in strong way; the deceleration in export began in October 2008 and every month since then growth has been negative with the worst decline of 16 per cent now in January 2009. The hardest-hit sectors include handicrafts, carpets, cotton yarn & fabrics, gems & jewellery, computer software, coal and minerals, oil meals and rice. Foreign trade figures compiled by the DGCI&S and released by the Department of Commerce show exports in January at $12.38 billion were 15.9 per cent lower than $14.71 billion in the corresponding month of 2008, while imports at $18.45 billion were 18.2 per cent lower than $22.56 billion in the comparable month. Oil imports during January 2009 were lower by 47.5 per cent at $4.46 billion (compared with $8.50 billion), reflecting the steep drop in global crude prices. The sharp drop in imports had a flattering effect on the trade deficit, which at $6.07 billion in January 2009 was lower than $7.84 billion in the same month a year ago. The outlook for exports and employees working in export industry continues to be perilous unless bold measures are put in place such as increase in drawback and the DEPB rates, abolition of fringe benefit tax and exemption from service tax and neutralisation of higher costs of credit through interest subvention, as pointed out by FIEO.
The cumulative value of exports in April-January 2008-09 at $144.26 billion shows a growth of 13.2 per cent compared to $127.45 billion in the corresponding month of 2007-08. While imports at $243.35 billion was 25.3 per cent higher than the corresponding amount of $194.28 billion. In rupee terms, the growth in import was 39.4 per cent higher (at Rs 10, 90,182 crore as against Rs 7, 82,207 crore). As the rupee has been steadily depreciating against the dollar, exports in rupee terms registered a modest 4.3 per cent increase at Rs 60,460 crore against Rs 57, 948 crore. With overall import growth registering a 25.3 per cent spurt in the first 10 months of the current fiscal and exports growing at 13.2 per cent, the trade deficit has zoomed to $99 billion, against $66.83 billion in the comparable months of 2007-08.

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