MUMBAI : Non-oil exports have contracted, month-on-month, since April. Exports of petroleum and related products have been rising in the first four months of 2017-18.
“Non-oil exports fell sharply in July (by 6.47 per cent, month-on-month, seasonally adjusted), continuing the contractionary trend which had started in March," a report by HSBC Securities and Capital Markets pointed out.
Non-oil exports have declined in every month of the current financial year (FY1, falling by 2.67 per cent in April, 1.10 per cent in May, 2.67 per cent in June and 6.47 per cent in July. Month-on-month calculations run the risk of not taking into account seasonal variations in trade.
In July, the first month after the goods and services tax (GST) was rolled out, major export sectors were depressed. This was especially true for gems and jewellery, which saw a more than 25 per cent fall in July, compared to a 13.3 per cent fall in June. Gold imports in July rose by 95 per cent to $2.1 billion.
“In addition to seasonal factors, the month-on-month decline in non-oil merchandise exports in July is likely to reflect the lagged impact of the appreciation of the rupee as well as some disruption after the introduction of the GST," said Aditi Nayar, Principal Economist at ICRA.
Also, pharmaceuticals and engineering goods exports registered declines.
Petroleum product exports rose by 11.15 per cent in July after a 3.97 per cent rise in June. This was helped by stable global crude oil prices, which were expected to rise in the next couple of months, an economist said.
Year-on-year calculations that compare a particular month with the same month a year ago showed exports growth had slowed in July to 3.94 per cent even as the Country witnessed 11 straight months of rise in outbound trade.
India exported $22.54 billion worth of goods in July against $21.68 billion in the same month last year, according to data issued by the Commerce Ministry recently.
Growth has continuously declined since March, when it hit a high of 27 per cent, the steepest in a little over five years. In June, it was 4.39 per cent, down from 8 per cent in May.
Of the 30 most important export sectors 11 posted declines. This was down from the previous month when the figure was 15.
The HSBC report shows that exports continued to weaken in volume terms as well. While the continued rise of the rupee had a lot to do with this, other issues such as the GST roll-out and lower imports also contributed.
“Our research shows that exchange rates explain under 20 per cent of exports weakness. The giant share of 50 per cent is explained by domestic bottlenecks, and 33 per cent by world growth," the HSBC report said.
While a stronger currency hurts exporters’ earnings and erodes India’s competitive advantage, it also makes imports as well as foreign travel and education cheaper. Economists have predicted a further strengthening of the rupee, at least in the near term, but some of them have pointed out that it will help the economy overall because India is an importing nation.