Despite the broader economy showing some green shoots, there is no respite for the export sector. India’s exports for the month of May fell at an annual pace of 29.2% to $11 billion, its eighth straight monthly fall as the economic downturn in West kept export demand subdued.
Imports also went down, at an even sharper rate of 39.2%, to $16.2 billion, primarily on account of lower cost of oil imports. It also helped bringing down the trade deficit to nearly half compared to year ago level of $11.13 billion to $5.2 billion in May 2009.
Exports have been facing the heat of the slowdown since September last year when the collapse of Lehman Brothers in the US triggered an acute credit crunch followed by global economic downturn. However, Indian exporters may take relief in fact that other major exporting countries like China, Japan and Germany are witnessing even sharper cuts. Japanese exports for the month of May were down by more than 40%.
Economists expect that the decline in Indian exports will come to a halt after September as the high base effect for export data will start tapering off. Exports were showing growth of in excess of 30% till August 2008 and therefore, current year’s exports will show a heavy year-on-year decline till August.
However, from September onwards the growth of exports came sharply down last year, which will results in better y-o-y export figures for the current year beginning from September or October. Also, there is likely to be some sequential improvement in global economy by then, which will raise the demand for Indian goods abroad, supporting the export sector.