Exports up 35% in May, 7th straight monthly rise

India’s exports rose from a year earlier for the seventh straight month in May as demand picked up for iron ore, oil and leather goods, but the 35% jump (to $16.1 billion) was flattered by a low level of shipments in May 2009.

While demand has picked up from some of India’s biggest export markets, including the United States, commerce secretary Rahul Khullar has cautioned the euro zone debt crisis could reduce appetite for Indian goods.

He said a depreciating euro has hurt exporters. “There is some degree of recovery on the export front,” Khullar said, adding “don’t get carried away by the numbers ... it is a huge base effect kicking in.”

Imports rose 30.8% (to $ 27.4 billion) from a year earlier, Khullar said. That left a trade deficit of $11.3 billion, the highest figure since November 2008 as oil imports rose more than 70% in April-May and with high demand for iron, steel and inorganic chemicals to fuel India’s fast-paced industrial growth.

Asia’s third-largest economy is targeting close to 15% export growth in the current fiscal year, following a drop of 4.7% in the 2009-10 fiscal year.

Global trade flows are expected to rebound by nearly 10% in 2010, the World Trade Organisation has said.

Khullar said iron ore exports for April-May have more than doubled
over a year earlier, while oil exports have benefited from India’s growing refining capacity and rising external demand.

Indian exports have grown strongly in the past half year after 13 straight months of decline. Some sectors lag and the federal government has provided aid to struggling exporters.

India has exported $33 billion worth of goods in April and May, the first two months of the current fiscal year, a rise of 35.7%, Khullar said. He said he was “cautiously optimistic” about exports in the coming months despite economic uncertainty in Europe.

“The exchange rate depreciation of the euro is making European goods more competitive than Indian goods,” he said.

Oil imports have surged on higher demand and prices while India’s appetite has also risen for ferrous and non-ferrous metals, machine tools and transport equipment, he said.

“What are you are really seeing is evidence on the import side of
the reason why 17.6 is your growth,” he said.

India’s industrial output rose 17.6% in April from a year earlier, the strongest since December 2009.

India’s current account deficit widened marginally in the December quarter to $12.03 billion because of a decline in invisible receipts.

“A lot of industry is now building up their capacity,” said NR Bhanumurthy, economist at National Institute of Public Finance and Policy, a Delhi-based think tank. “This year the policymakers are more or less mentally prepared for a higher current account deficit,” he added. “It is not a scary situation because we have a huge cushion in foreign exchange reserves.”