April trade

The government said exports grew 3.2% to $24.5 billion in April, led by a fall in textiles and gems & jewellery shipments the demand for which has been hit in Europe and the US. Lower demand and a strike in the gems & jewellery sector also affected imports, which grew 3.8% to $37.9 billion in April, resulting in a trade deficit of $13.4 billion.  Although lower monthly imports and a contraction in trade deficit augur well for the current account deficit, the government acknowledged that the slowdown in exports will make it tough to achieve the $500-billion target by 2013-14. The government is drawing comfort from the lowest monthly import and trade numbers seen since May 2011 and believes that the trade deficit could be lower than the record $185 billion seen in 2011-12, if the trend continues for the remainder of the current financial year. Khullar, however, dismissed suggestions that the trade deficit had any impact on exchange rates, saying it was driven by capital flows. 
But textiles and gems & jewellery, which are not just large export segments but also major employers, are a sore point. Readymade garment exports fell by nearly 10% this April to $1 billion, while man-mades and cotton yarn exports too contracted. Similarly, gems & jewellery fell 27% to $2.6 billion. 
On the imports side, the growth moderation was led by pearls and stones whose shipments fell 63% to $1.2 billion, while gold & silver imports were 33% lower at $3.1 billion. 
Besides a slowdown in exports, the economy is seeing a decline in capital inflows, which is putting pressure on the central bank to support the rupee —which has lost nearly 8% against the dollar since March.