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ShareThe bad news on the foreign trade front has turned dire in July, with both exports and imports contracting by 28.4% and 37.1%, respectively.
On a year-on-year basis, this is the tenth month in a row when exports have declined and for imports, the preceding six months have also witnessed a setback.
However, some comfort can be drawn from the fact that the trade deficit for July has shrunk sizeably --- to $6 billion from $12.15 billion a year ago.
This implies though exports have fared badly, appetite for imports has also waned during the month so that the import-purchasing power of exports had improved to 69.4% from 61% over the 12-month period.
But, the underlying message sent out by the foreign trade data should engender concern. Demand recession continues in our major export markets in the European Union and the United States; the need to capture new markets in Africa and Latin America, emphasised by the Foreign Trade Policy statement cope with crisis of this sort brooks no delay.
As regards the slackening tempo of our imports, while the drop in crude oil prices is partly responsible, the fact that non-oil imports were down by a third in July indicates that the domestic industry too is not out of the woods.
In both cases, the deceleration is very pronounced. Oil imports had plunged by a whopping 55.5% to $5.64 billion --- a sequel to Indian crude basket falling by 50% this fiscal compared with the preceding year. Non-oil imports were down by 24.5% to $13.98 billion.
With July performance in keeping with the past trends, the overall picture is far from reassuring. Cumulatively, exports have fallen by 34.1% to $49.65 billion thus far in 2009-10; import bill has been lower by 32.5% at $78.56 billion.
As a result, trade deficit for the period, April- July 2009, stood at $28.91 billion as against $41.09 billion last year.
In particular, the dismal showing in exports merits a deeper scrutiny. In 2008-09, exports were of the order of $168.70 billion whereas the actual level reached during the April- July, 2009 period was $49.65 billion.
Thus, even to attain the value of exports in the current year that was realised in the preceding fiscal, we must boost our exports to $119.05 billion in the remaining eight months.
That is, the monthly average export figure should approximate to $14.88 billion; in other words, exports must increase at the rate of 20% between August 2009 and March 2010 from the monthly average of $12.41 billion during the first four months.
This task appears Herculean and more so in the context of the difficult international trade environment and the forecast that world trade may shrink by around 10% this year.
