May 2010 exports snapshot

Exports marked the seventh straight month of growth in May, rising by over 35%, essentially on low base effect, to $16 billion but exporters may take a hit on earnings due to the sharp decline of the euro, commerce secretary Rahul Khullar said .Don’t get carried away by these numbers. These are essentially being driven by the base effect. In May 2008, exports were in the range of $18.5 billion. We are still below that number,’’ Khullar said. Exports had dropped to $12 billion in May 2009 in the wake of recession in the Western markets that consume the bulk of Indian shipments.
A sharp erosion in the euro because of the still lingering debt crisis in the Eurozone economies has reduced the margins of exporters. Since December 2009, the euro has depreciated about 18% against the rupee. “Exchange rate depreciation of the euro is making European goods more competitive, and Indian goods more expensive. That’s how depreciation works,’’ Khullar said adding if exporters’ margins are small they cannot continue in business. Echoing the same view, Federation of Indian Export Organisations president A Sakthivel said: “We must watch the developments in Europe cautiously as the crisis in Greece may spread to other countries’’. Of the $176.5 billion exports last fiscal, Europe accounted for 23%.
For the April-May 2010-11 period, exports grew by 35.7% to $33 billion against the year-ago period. Labour-intensive sectors like engineering, gems and jewellery, leather and man-made fibres have registered healthy growth rates, Khullar said.
Imports too surged by 19.8% in May to $27.4% billion, indicating the rapid pace of domestic economic activity and leading to a trade gap of $11.3 billion during the month under review. Khullar said by the end of first quarter, exports are likely to be around $48 billion compared to $37.9 billion in the year-ago period. Imports during the first two months of this fiscal grew by 29% to $54.7 billion against $38.9 billion in the same period last year.