Commerce Minister Sharma Positive on Pharma Growth
Merchandise exports in August brought needed cheer to a gloomy economic environment, growing 13 per cent to $26.1 billion compared with $23.1 billion in the same month last year.
Month-on-month, this is a second straight month that exports saw double-digit growth, due to improved demand in the US, Europe, Africa and the Asia-Pacific.
Imports in August contracted 0.7 per cent to $37.1 billion from $37.3 billion in August 2012. Trade deficit, which is part of the wider current account deficit (CAD), declined almost 23 per cent at $10.91 billion in August against $14.17 billion in the corresponding year-ago month.
Commerce and industry minister Anand Sharma said the import contraction was due to a number of steps taken to curb gold import. The government had, among other things, raised the tariff on gold to 10 per cent in August from the earlier eight per cent. Gold import in August came down to $0.65 billion compared to $2.2 billion in July this year, said the director general of foreign trade, Anup K Pujari.
However, the country’s import bill remained under pressure on account of a rise in crude oil by 17.9 per cent to $15.1 billion in August against $12.8 billion in the same month in FY13. Total oil import during April-August rose to $69.7 billion, up 5.6 per cent from $66 billion in the corresponding period of 2012-13.
“Oil imports continued to put pressure due to a rise in prices of Brent crude, which was $112-119 a barrel last month,” said Sharma.
Total export during April-August was $124.4 billion against $119.8 billion earlier, up 3.9 per cent. Total import rose 1.7 per cent to $197.8 billion over the $194.4 billion during the corresponding period of FY13, according to the data released here on Tuesday.
“We have taken a number of steps to reverse the trend in exports, in negative territory for some time due to contraction of demand and other global factors. We are firmly in positive territory now and we are gradually closing the big gap by bringing imports down,” said Sharma.
The government is expecting import containment to continue, with a gradual decline in coal import, Sharma said, as a result of which the trade deficit is expected to contract further.
Non-oil import was down 10.4 per cent in August, reaching $21.95 billion from the earlier $24.5 billion. In April-August, total non-oil import fell 0.3 per cent to $128.1 billion from $128.5 billion in the same period last financial year. Depending on whether imports other than non-essential commodities are declining or not, the figures will have repercussions on economic activity.
Issuing the data on Tuesday, Sharma also said he was expecting agricultural exports to do significantly well this year, due to a robust monsoon and bumper harvest.
Export of rice is expected to fetch a good price this year, with Russia lifting a ban on import of non-basmati rice from India, said commerce secretary S R Rao.
The minister denied an export rise due to the rupee’s fall. He said 45 per cent of the country’s exports had high import content. Exports were rising due to a rise in demand in the traditional markets of the US and Europe, he said, and also due to diversification strategy by exporters to enter markets in Africa, Asia and Latin America.
According to Rao, exports from all sectors did well in August, barring gold jewellery. He also expressed concern over a fall in export of engineering goods, which he said showed some sign of improvement in August.
Rise in exports, coupled with import containment, is expected to improve the current account deficit situation this financial year, said Manishi Raychaudhuri, Asia-Pacific strategist at BNP Paribas. The trade deficit is one part of the CAD, the others being services trade, remittances and net investment income.
On resuming iron ore export, Sharma said the government was clear that it wanted to export iron ore fines not used by the domestic steel industry.
The Federation of Indian Export Organisations has suggested a two-pronged strategy. It has urged support to some sectors still in the red, such as engineering, electronics and gems & jewellery, with more help to sectors such as textiles, pharmaceuticals, chemicals, plastics, leather, cereals and value-added agricultural products.
All of these can easily add a few billion dollars more, to help us cross the export target fixed for this year, said its president, Rafeeque Ahmed. The government has set a target of exports rising to $325 bn in the current financial year against $300 bn in 2012-13.
The World Trade Organization recently cut its forecast for global trade growth to 2.5 per cent for this year from 3.3 per cent earlier and revised the projection down to 4.5 per cent for 2014 from five per cent previously.
While other key economic indicators are yet to show signs of recovery, India’s exports went up for the second straight month in August, while its trade deficit narrowed on back of leaner imports of gold.
According to the Commerce Ministry, exports climbed 12.97 per cent to $26.14 billion last month and imports declined 0.68 per cent to $37.05 billion. India’s trade deficit also narrowed to $10.9 billion in August from $14.7 billion in the corresponding month last fiscal.
Gold imports dipped sharply to $0.65 billion in August from $2.2 billion in July.
Commerce and Industry Minister Anand Sharma said, “Exports are picking up because demand is improving in both traditional and new markets.” He said measures to promote exports are bearing fruit and hoped the good monsoon would help economic growth this year.
All the exporting sectors barring jewellery have shown positive growth in August. Oil imports in August grew by 17.88 per cent to $15.1 billion. However, non-oil imports declined by 10.4% to $21.9 billion, the Minister said.
The Minister said that Russia has lifted a ban on import of non-Basmati rice from India, which will pave the way for India’s exports further. Export growth had touched a two-year high of 11.64 per cent in July, when it touched $25.83 billion.
Imports of gold and crude oil have fuelled India’s trade deficit, which has contributed to the widening current account deficit (CAD). The CAD touched an all-time high of 4.8 per cent of gross domestic product, or $88.2 billion, in 2012-13.
The government proposes to bring down CAD to 3.8 per cent of GDP, or $70 billion, in the current fiscal.
Reacting to exports growth, AEPC Chairman A Sakthivel said narrowing trade deficit will surely help in easing CAD. “In the given situation, government needs to adopt two pronged strategy to support sectors that are still in red like engineering & electronics, while simultaneously providing additional support to sectors such as textiles, pharma, chemicals and leather,” FIEO said.
