Wor­ri­some Slide

India Business Journal - - TRADE - RA­JESH RAI

A ris­ing ru­pee and un­cer­tainty over GST take a toll on ex­ports which con­tinue to post slower growth month af­ter month.

Have the coun­try's mer­chan­dise ex­ports come out of the woods? This ques­tion eludes a straight an­swer even af­ter 11 con­sec­u­tive months of growth in the coun­try's ship­ments. More­over, go­ing by the Com­merce Min­istry's data, it is quite ev­i­dent that In­dia's ex­ports are not in the pink of health.

In March this year, the ship­ments recorded growth of 27.6 per cent year on year. The ro­bust March fig­ures seemed to clar­ify that the coun­try's ex­ports were firmly in the pos­i­tive zone af­ter lan­guish­ing in the neg­a­tive ter­ri­tory for two suc­ces­sive years.

No sooner had the good news brought cheer that the ex­port growth be­gan los­ing steam in the fol­low­ing months. The coun­try's ship­ments grew by a lower 19.77 per cent in April, fur­ther slow­ing down to 8.32 per cent in May, 4.39 per cent rise in June and 3.94 per cent in July.

Ex­ports dur­ing April-July 2017-18 in­creased by 8.91 per cent over the cor­re­spond­ing pe­riod in the pre­vi­ous year to $94.75 bil­lion, while im­ports dur­ing the same pe­riod grew by 28.3 per cent to $146.25 bil­lion. Non-petroleum and non-gems and jew­ellery ex­ports dur­ing this fi­nan­cial year so far jumped by 9.05 per cent to $94.75 bil­lion. Oil im­ports dur­ing April-July 2017-18 saw a 20.87 per cent jump to $31.02 bil­lion. Non-oil im­ports dur­ing FY18 in­creased by 30.46 per cent to $115.23 bil­lion.

Dis­mal July

Goods ex­ports in July reg­is­tered mea­gre 3.94 per cent year-on-year growth, grow­ing at the slow­est pace since Novem­ber 2016, when ship­ments rose by a mere 2.56 per cent. Data re­leased by the Com­merce Min­istry show that ma­jor com­mod­ity groups of ex­port show­ing pos­i­tive growth in the month un­der re­view in­clude en­gi­neer­ing goods (15.16%), petroleum prod­ucts (20.27%), or­ganic and in­or­ganic chem­i­cals (20.67%), cot­ton yarn, fab­rics and made-ups and hand­loom prod­ucts (5.39%) and marine prod­ucts (30.53%). Non-petroleum and nongems and jew­ellery ex­ports in July in­creased by 6.93 per cent.

Mean­while, goods im­ports in July recorded 15.42 per cent growth, the slow­est pace of growth since 1.13 per cent growth reg­is­tered in Jan­uary this year. This led to trade deficit of goods nar­row­ing on a month-on-month ba­sis to $11.45 bil­lion, the low­est since $10.5 bil­lion recorded in March this year.

Ma­jor com­mod­ity group of im­ports show­ing high growth in July were petroleum prod­ucts (15.02%), elec­tronic goods (22.5%), machin­ery, elec­tri­cal and non-elec­tri­cal goods (7.34%), pearls, pre­cious and semi­precious stones (6.86%) and gold (95.05%). Oil im­ports grew by 15.02 per cent in July, while non-oil im­ports rose by 15.55 per cent.

T S Bhasin, the chair­man of the coun­try's apex en­gi­neer­ing ex­ports body EEPC In­dia, notes that growth in ex­ports has cer­tainly slowed, with ris­ing value of the ru­pee against the US dol­lar, ad­versely im­pact­ing the bot­tom line of ex­porters. "This is quite ev­i­dent from the trade data that show that while ex­ports for July grew by 3.94 per cent in dol­lar terms, in ru­pee terms, the growth has turned neg­a­tive. In ru­pee terms, ex­ports have shrunk by 0.32 per cent in July to Rs 1.45 lakh crore," points out Mr Bhasin. He fur­ther adds that while en­gi­neer­ing ex­ports have still been grow­ing at a re­spectable pace, it is due to pick-up in base me­tals. But the ru­pee value is a cause of con­cern for ex­porters.

There is another fac­tor that has put brakes on ex­port growth. Ac­cord­ing to ex­porters, im­ple­men­ta­tion of the Goods and Ser­vices Tax (GST), the new in­di­rect tax regime that came into force from July 1 this year, will fur­ther im­pact growth of the coun­try's ex­ports. "We would not be able to reach the $300-bil­lion fig­ure this year," stresses an ex­porter, who did not wish to be named. How­ever, the ex­porters' body, the Fed­er­a­tion of Indian Ex­port Or­gan­i­sa­tions (FIEO), em­pha­sises that the coun­try's goods ex­ports will reach $325 bil­lion in 2017-18.

Apart from the bullish num­ber put out by the ex­porters' body, the FIEO is con­cerned over ris­ing liq­uid­ity crunch among ex­porters. The FIEO has time and again raised the is­sue of block­age of about Rs 1,85,000 crore an­nu­ally with the gov­ern­ment with the GST com­ing into force. Un­like ear­lier, ex­porters now have to pay the du­ties first and seek re­fund later af­ter ex­port­ing the goods. In the pre-GST regime, they were get­ting ex­emp­tions from pay­ing of taxes ab ini­tio. "We are wor­ried with the liq­uid­ity is­sue as the re­fund mech­a­nism would re­quire pay­ment of GST first and its re­fund sub­se­quently. The ad­di­tional cost of credit to man­age the liq­uid­ity should be borne by the gov­ern­ment, if the present ex­emp­tion is not brought for­ward in the GST. On a rough es­ti­mate, ex­port sec­tor would be los­ing ex­port com­pet­i­tive­ness by about 2 per cent, and the same needs to be off­set to the ex­port sec­tor," adds a state­ment from the FIEO.

Amid con­cerns of bleak ex­port prospects in the near fu­ture, mer­chan­dise ex­port growth of 8.9 per cent in April-July 2017 is quite heart­en­ing. It should be re­called that this pos­i­tive, long-term growth in ship­ments fol­lows two con­sec­u­tive years of shrink­ing ex­ports.

What seems to have helped lift ex­ports this year so far is the uptick in com­mod­ity prices. This is re­flected in the turn­around in petroleum and ore and min­er­als ex­ports. En­gi­neer­ing goods and gems and jew­ellery, which ac­count for 38 per cent of In­dia's ex­ports, recorded growth rates of nearly 11 per cent each in the April-July pe­riod against (-)4.8 per cent in the year­ago pe­riod.

With agriculture and marine prod­uct ex­ports also show­ing a sharp jump af­ter shrink­ing last year, it would seem that the ex­port turn­around this year has been broad-based even as labour­in­ten­sive sec­tors, such as tex­tile and leather, be­sides drugs and phar­ma­ceu­ti­cal, reg­is­tered neg­a­tive growth. The growth has been ge­o­graph­i­cally dis­persed as well with ex­ports to Europe, the US and China up by 5.5 per cent, 5 per cent and 13.1 per cent, re­spec­tively in 2016-17.

How­ever, the slow­ing pace of growth of ex­ports this year is in­deed wor­ri­some. The pos­i­tive num­bers should be seen in the con­text of the base ef­fect of ex­port fig­ures when ship­ments were in the neg­a­tive last year. Another plau­si­ble fac­tor at work here is the ex­e­cu­tion of ear­lier or­ders. No won­der, im­prove­ment in ex­ports should have taken place amid slug­gish trends in world trade. Mean­while, the ru­pee con­tin­ues its strong rally even as ex­porters re­main clue­less in the tran­si­tion phase of GST. Amid these set­backs, one only hopes that ex­ports do not slip back into the neg­a­tive zone.

"The trade data show that while ex­ports for July grew by 3.94 per cent in dol­lar terms, in ru­pee terms, the growth has turned neg­a­tive and shrunk by 0.32 per cent." T S BHASIN Chair­man, EEPC In­dia

"We are wor­ried with the liq­uid­ity is­sue as the re­fund mech­a­nism would re­quire pay­ment of GST first and its re­fund sub­se­quently. On a rough es­ti­mate, the sec­tor would be los­ing ex­port com­pet­i­tive­ness by about 2 per cent."

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.