New Delhi, June 11: India’s exports grew at a double-digit pace for the first time in seven months in May, narrowing the trade deficit and setting the ground for the easing of restrictions on gold imports.
Exports last month rose 12.4 per cent to $28 billion from a year earlier, while imports fell 11.4 per cent to $39.23 billion, the ministry of commerce and industry said.
The twin effects led to the trade deficit narrowing to $11.23 billion from $19.37 billion a year earlier. The gap, however, was wider than April’s $10.1 billion.
According to commerce ministry data, gold imports, which were responsible for a widening trade deficit and consequently a worsening current account deficit (CAD) last year, fell 72 per cent to $2.19 billion in May from $7.7 billion in May 2013.
Encouraged by the trade data, the commerce ministry has asked the finance ministry to ease gold import restrictions, which were imposed last year to check the widening CAD.
“It is definitely an encouraging sign,” commerce secretary Rajeev Kher said. “If this trend sustains I am sure we are reviving... It seems that they (export products) are now acquiring their natural levels.”
Kher said his ministry favoured the rationalisation of the gold import duty. The government had increased the import tax on gold to the current level of 10 per cent last year. He said the appreciating rupee did not come in the way of double-digit export growth.
“There is a positive spirit and if this trend continues next month I will definitely be saying that there is a revival (in global demand). So, I would like to see the next month also,” he added.
Asked about the export target for 2014-15, he said: “We are working towards something like $1 billion exports on a daily basis.”
Kher said India and the US were planning to start trade talks in July and could hold a ministerial level meet in October after an expected summit between Prime Minister Narendra Modi and US President Barack Obama in Washington.
Bilateral trade with the US stands at about $100 billion annually but is below potential because of disputes over protectionism and intellectual property rights that have worsened in the past two years.
Sectors that recorded a healthy export growth include engineering (22.09 per cent), petroleum products (28.7 per cent), ready-made garments (24.94 per cent), pharma (10 per cent) and chemicals (13.8 per cent).
Curbs on gold imports impacted the export of gems and jewellery, which registered a marginal growth of 1.36 per cent to $3.43 billion in May. Iron ore shipments dipped 18.95 per cent to $72 million.
On agri exports, in view of a possible deficit in the monsoon, Kher said: “Agri exports as far as possible should be open but clearly they are underlined by the attenuating factors of domestic demand and supply.”
India Inc today said the pick-up in exports in May was aided by the economic revival in the US and EU.
“Acceleration in export growth is good news. Double-digit rise... reflects our exporters’ hard work,” Ficci president Sidharth Birla said.
Rafeeque Ahmed, president of Fieo, said: “Going by the current trend, exports could reach $360 billion in 2014-15. However, we need to address supply-side constraints.”
“This sends out a strong signal that the Indian economy is striding into recovery,” chairman of CII’s export-import committee, Sanjay Budhia, said.
Crisil in a research note said, “With advanced economies’ growth expected to rise to 2.2 per cent in 2014 from 1.3 per cent in 2013, we expect faster growth in India’s exports this year, despite a marginal appreciation in the rupee in recent weeks.”
While there was optimism on export growth, some expressed caution. “We expect the positive trend to continue provided we reduce transaction costs,” EEPC India chairman Anupam Shah said.
Aditi Nayar, senior economist with ICRA, said: “The pick-up in export growth in May benefits from a benign base effect and is unlikely to prove sustainable over the coming months. With monsoon-related concerns clouding efforts to contain inflation, competitiveness of exports would be eroded if the rupee appreciates on the back of healthy FII inflows.”