India?s exports rise first time in nine months

Updated: Wed, Feb 13 2013. 01 22 PM IST

New Delhi: India?s merchandise exports rose for the first time in nine months in January because of a recovery in engineering and gems and jewellery shipments.

Exports in January rose by 0.82% to $25.59 billion, while imports grew 6.12% to $45.6 billion. The trade deficit widened to $20 billion from $16.7 billion a year ago.

Commerce secretary S.R. Rao said he expects the growth momentum to continue. ?I hope the additional incentives given to exporters in January result in better traction for exports,? he added.

In the first 10 months of the fiscal year till January, exports contracted 4.86% to $239.7 billion, while imports remained flat at $406.9 billion. The trade deficit during the period expanded to $167.2 billion from $154.9 billion in the same period a year ago.

Rao said the rising trade deficit remains a cause of concern. ?Because of huge surge in imports of crude oil for captive power generation, oil imports have been surging, adding to the trade deficit,? he said.

Oil imports grew 6.91% to $15.9 billion in January while cumulatively, it grew 11.56% to $140.4 billion.

?The oil import bill is definitely a challenge, but for a growing economy, energy needs have to be met,? commerce and industry minister Anand Sharma said at an event in Mumbai.

India?s current account deficit touched a record high in September at 5.4% of gross domestic product (GDP) due to slowing exports and heavy oil and gold imports.

Worried that India?s ability to fund the rising current account deficit is becoming increasingly stretched, and will lead to fresh pressure on the rupee, the central bank had warned after a 0.25 percentage point reduction in its policy interest rate last month that future rate cuts will depend upon the current account gap narrowing and inflation subsiding.

On Monday, Reserve Bank of India governor D. Subbarao reiterated his concern about financing the current account deficit with volatile capital flows, and he projected the deficit to touch a record high for fiscal year 2012-13, ending in March.

Many analysts expect the current account deficit to be around 4.5-5% of GDP in 2012-13, higher than 4.2% previous year.

?The high current account deficit is unsustainable as it can?t be funded for a long time with capital flows and it will get adjusted through the exchange rate,? said A. Prasanna, economist, ICICI Securities Primary Dealership. ?The exchange rate will depreciate when the correction happens.?

The rupee touched its lowest in over a month in early January at 55.38 to the dollar, but has since recovered on capital inflows.

Portfolio inflows into India were robust in Asia?s third largest economy at $31.41 billion in 2012 and $8.34 billion so far in 2013.

Reuters contributed to this story.

Source: http://www.livemint.com/Politics/j8OIL6Cxu9SAQBd8nE9OUL/Indias-exports-rise-first-time-in-nine-months.html

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