Weakening exports widen July trade deficit

The sharpest-ever fall in exports since November last year sent India’s trade deficit widening to $15.5 billion in July and raising concerns for the government, already fighting a high current account deficit.

“The government is concerned over the drop in exports,” said Commerce Minister Anand Sharma. He was referring to the weakening of demand from key western markets that has contributed to a slowdown in India’s shipments and said that meeting a trade target of $360 billion this year will pose a stiff challenge.

He, however, expressed the hope that there will be a turnaround in exports around the September-October period.

“I have said earlier that the various incentives we have announced and the sector-specific thrust, the support that has been given to the SMEs and certain major sectors, which are labour-intensive -- handloom, handicraft, readymade garments - through interest subvention and other support measures. We hope for a turnaround by September-October. We hope to bring about an improvement and enter strong positive territory,” Sharma added.

The widening of the deficit was due primarily to a sharp contraction in exports, which dropped 14.8 per cent from a year earlier to $22.4 billion.

Imports too came down, but at a slower pace of 7.6 per cent to $37.9 billion. The government is likely to take more steps to revive exports. “The measures will be more in the nature of easing technical barriers or transactional costs to make exports more competitive,” Commerce Secretary S R Rao said.

The trade deficit widened to $15.5 billion in July, compared with $14.8 billion a year earlier, Director-General of Foreign Trade Anup Pujari, told reporters on Tuesday.

The outward shipments declined mainly due to a drop in exports of petroleum products and slowdown in demand for Indian shipments because of the economic troubles in the US and the Euro zone.

Weak trade data has also raised fears of a worsening balance of payment situation and further impact on the Indian rupee. India is aiming to boost exports by about 20 per cent to $360 billion in fiscal 2013.

In June, the government announced a $1.79-billion package to encourage exports, especially by small enterprises that are usually the worst hit during a demand slowdown.

It had extended a two per cent interest subsidy on loans to handloom and handicraft exporters and to some other small and medium enterprises. The government has also encouraged exporters to tap new markets in South East Asia to cushion the impact of the demand slowdown in western markets.

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