India's Exports Increase at Slowest Pace in 14 Months (Update2)
By Kartik Goyal
July 1 (Bloomberg) -- India's exports grew at the slowest pace in 14 months in May as weakening global expansion hurt shipments of clothes, steel and electronic goods.
Overseas sales rose 13 percent from a year earlier to $13.8 billion, slower than April's 31.5 percent gain, the government said in a statement in New Delhi today. Imports increased 27 percent to $24.5 billion, widening the trade deficit to a record $10.76 billion.
Shipments are likely to slow this year as the fastest price gains in more than 13 years prompted Prime Minister Manmohan Singh to ban shipments of some food products and other commodities to contain inflation. A slowdown in the U.S. and other developed countries is hurting exports across the region.
``The biggest challenge to the external sector this year is slowing global demand and rising oil prices,'' said Sonal Varma, a Mumbai-based economist at Lehman Brothers Inc. ``We expect export growth to moderate.''
Global trade growth is likely to drop in 2008 after slowing to 5.5 percent in 2007 due to weaker demand in Europe and Japan, expectations of a recession in the U.S. and faster inflation, according to the World Trade Organization.
South Korea's export growth cooled in June to 17 percent from a year earlier, less than the 26.7 percent gain in the previous month, according to figures released today. Hong Kong's overseas sales expanded at a slower pace of 10.3 percent in May.
U.S. Slowdown
The share of the U.S. in India's total exports declined to 13.3 percent in the ten months to January, compared with 15.1 percent in the year-ago period, according to the latest breakdown of overseas sales released by the central bank. India gives a more detailed analysis of exports five months after releasing initial data.
Shipments to European Union and Asian developing countries accelerated while exports to OPEC and Latin American nations moderated, the central bank said.
India has over the past three months banned the export of pulses, wheat, rice, cement and some steel products to contain inflation, that accelerated to 11.42 percent in the week ended June 14.
Exports of steel items declined 2.1 percent in the ten months to January, compared with a 51.4 percent gain in the year-ago period, the central bank said in a report. Overseas sales of electronic goods grew at a slower pace of 6.4 percent, compared with 34.9 percent a year-ago.
Cost Competitiveness
Trade Minister Kamal Nath last week said he's confident of meeting the $200 billion exports target for the current fiscal year that started April 1. Better cost competitiveness and the rupee's depreciation are expected to help exporters, he said.
India's rupee declined for a third day today on concern that rising oil prices will increase demand for dollars and losses in the benchmark stock index will keep global funds away from local shares. The rupee fell 9.2 percent this year to 43.405 a dollar as of 12:50 p.m. in Mumbai today, the third- worst performance among the 10 most-traded Asian currencies.
``The rupee will remain under pressure in the near-term,'' said Shubhada M. Rao, chief economist at YES Bank Ltd. in Mumbai. ``The Reserve Bank may not like a depreciating trend and we expect the currency to start appreciating in the later part of the year.''
India plans to withdraw tax incentives it had announced last year to help exporters tide over the impact of a more than 10 percent gain in the rupee, the Financial Express reported today, citing India's Commerce Secretary G. K. Pillai.
Export Promotion
To help boost overseas sales, the government plans to focus on promoting exports to 10 countries including Mongolia, Bosnia- Herzegovina, Albania, Macedonia, Croatia, Honduras, Djibouti, Sudan, Ghana and Colombia, Nath said on April 11.
Trade Minister Nath has set a target of more than tripling India's share of world trade to 5 percent by the year 2020 from the current 1.5 percent.
India's oil imports in May rose 50.8 percent to $8.46 billion as Indian refiners paid more for import of crude oil imports. India relies on imports of overseas crude oil to meet its three-quarters of its energy needs. Non-oil imports gained 17.4 percent to $16.08 billion.
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