The latest export data released for the month of September 2007 by the Commerce Ministry has surprised many.
Exports in September rose by close to 19 per cent in dollar terms to $12.8 billion. Exports in the first six months of the current financial, April-September 2007, thus went up 18.5 per cent to $ 72.28 billion, against the fiscal year's target of $ 160 billion set up by the ministry.
This data tells us two stories. Despite a 12 per cent appreciation in rupee against dollar, which has made Indian exports more expensive, the volume of exports witnessed an excellent growth. Secondly, the current trends suggest that the country is on its course to meet the export target for the year.
The happy story, however, ends here. The 18 per cent growth in dollar value of exports in the April-September 2007 was far lower than the 41 per cent growth we witnessed in the first half of last year. Worse, the rupee value of exports in the first half of current fiscal grew only 5.34 per cent against 48 per cent in the first half last fiscal.
This means that though the volume of exports had a moderate growth, exporters margins in rupee term are getting heavily squeezed. Though it is encouraging to see that exporters are pushing volumes, the question is how long they will continue in view of the rapidly falling margins.
The other worrying news is that despite a stronger rupee, our import bill is rising faster than before, widening the trade gap further. Imports during April-September 2007 at $109.20 billion was 25.51 per cent higher in dollar terms.
As a result, our trade deficit (imports minus exports) has shot up to $ 36.90 billion, which was 40 per cent higher than last year's level. With the oil prices ruling high at around $100 a barrel and the slowdown in exports, the trade deficit may further widen in the remaining months.
There is no doubt that all efforts must be made to narrow the disturbingly large gap between imports and exports.
Of course, our economy being robust and the financial system largely untouched by the subprime problems of USA, inflow of dollars in the form of foreign investments in stock markets and in asset creation has been good.
But the government, along with industry, will have to work on long term plans to boost exports through measures which will improve export competitiveness.
