India's exports contracted by 13.7 per cent in February for the fifth consecutive month this fiscal, while imports too dipped by 18.2 per cent, continuing the trend that began in January when both exports and imports entered the negative territory, according to initial estimates available with the Commerce Ministry.
Exports and imports in February are estimated at $13.04 billion and $17.02 billion, respectively. Exports had expanded 43.6 per cent in February 2008, while imports grew 47 per cent. The last time when exports declined on a continuous basis was between July 2001 and December 2001.
Trade deficit, the difference between exports and imports, is expected to decline to the lowest level since March 2008, at $3.98 billion. The final export and import figures for the month under consideration will be released by the commerce ministry on April 1, as data from more sea and inland Customs ports get tallied.
Going by the initial estimates, cumulative exports in the April-February 2009 period stood at $157.3 billion, an increase of 10.11 per cent over $142.85 billion seen in the same period of the previous year. Imports in the April-February 2009 period stood at $260.35 billion, an increase of 21 per cent over $215.22 billion in the year-ago period.
However, it is clear that even with the final numbers, one would still see a contraction in exports and imports. Taking cognisance of weak demand in the overseas markets, the commerce ministry had revised downward its export target to $175 billion in 2008-09 from $ 200 billion earlier.
Experts expect the slowdown in exports to continue in the coming months. "Outbound shipments are set to further moderate in coming months, reflecting dismal economic conditions world-wide. India's exports are forecast to be sluggish for the rest of the year, and an annual contraction is almost a certainty," said Sherman Chan, economist with Moody's economy.com.
Contracting exports and imports have meant that the trade deficit has become narrower. In the April-February period, the trade deficit stood at about $103 billion. Experts forecast a trade deficit of about $115 to $120 billion in 2008-09.
Indian exports have been contracting since October 2008, the time when the global financial crisis hit overseas markets like the United States, Europe and Japan, to which about 40 per cent of Indian goods are bound. Imports dipped for the first time in more than six years during January, 2009.
Apart form declining demand, the fall in commodity prices has also been attributed to shrinking trade values. This is because crude oil prices have been on declining since August, 2008, when it peaked at $ 147 a barrel.
As a result, India's crude oil import bill has also come down for the same reason.
Government sources say that import of machinery and capital goods, needed for expansion of factories have also come down, pointing towards weakening demand. Non oil imports in January had contracted by 0.5 per cent, which according to a report prepared by Tushar Poddar and Pranjul Bhandari of Goldman Sachs pointed towards "weakening" domestic demand.
