NEW DELHI : India’s merchandise exports grew at a double digit pace in May for the first time in seven months, providing a silver lining to an economic scenario recently darkened by disappointing gross domestic product (GDP) growth data for the financial year and persistently high consumer inflation.
Overseas demand for engineering, petroleum and textile products helped India’s merchandise exports rise 12.4% from a year ago to $28 billion last month, trade data released.
Merchandise imports declined 11.4% to $39.2 billion, leaving a trade deficit of $11.2 billion, a 10 month high. After disappointing 4.4% growth in exports in 2013-14 to $313.5 billion, the Commerce Ministry is planning to boost exports through a new foreign trade policy to be released after the budget is presented in early July.
At the same time, the trade deficit for the month was $11.2 billion, the highest since July 2013 when it was $12.2 billion. On the cards to boost export growth are measures including easing of gold import curbs for the benefit of gems and jewellery sector (where the yellow metal is a key input), as well as removal of Minimum Alternate Tax (MAT) and Dividend Distribution Tax (DDT) on Special Economic Zones (SEZ), said Mr Rajeev Kher, Commerce Secretary .
The measures, aimed at boosting manufacturing and exports and recommended to the finance ministry. In May, exports of gems and jewellery increased by a meagre 1.36% to $3.4 billion and gold imports fell by 72% to $2.2 billion.
The Commerce Ministry had strongly recommended that DDT and MAT levied on SEZ units and developers be abolished, he said. “There is a clear acknowledgement that SEZs are a tool of industrial development, manufacturing and exports. And recognizing that potential, we feel that the whole instrumentality of SEZ requires augmentation,” the Commerce Secretary said.
“And, therefore, our experience of the last few years shows that imposition of MAT and DDT suppressed the potential of SEZs as a tool of exports and industrial development. So we feel that those impositions should be done away with and this will liberalize the environment around SEZs so that entrepreneurs will make investments which will lead to manufacturing and employment,” Kher added. Given a possible monsoon deficit, Kher said the Government was taking a 'nuanced' approach on agriculture exports. “Agri exports, as far as possible, should be open, but clearly they are underlined by the attenuating factors of domestic demand and supply.” He said the Government was monitoring on a daily basis the price situation of milk, onion and pulses, and will take action if required, adding that, currently there is no concern on 'wheat and rice'.
Federation of Indian Export Organisations (FIEO) President M Rafeeque Ahmed, however, said this seemed to be the beginning of an upward march, backed by a better global trade forecast for 2014 and 2015.
"Going by the current trend, the export could reach $360 billion in 2014-15," he said. India's exports had stood at $312.35 billion in 2013-14.
But YES Bank Chief Economist Shubhada Rao said the trend was expected to be positive going ahead, as growth in the developed world quickened and offered further room in favour of emerging markets.
"Harbinger of the momentum ahead, recent exports data from China have topped market expectations, rising seven per cent in May. Today's data from India have offered yet another surprise, signalling the global trade cycle is strengthening," she said.
To a query on export targets for 2014-15, Kher said his department was working towards $1 billion worth of exports on a daily basis.
A World Bank report released, though, painted a somewhat grim picture of economic growth in India's leading trade partners. For instance, the US economy was pegged to grow only 2.1 per cent in 2014, only slightly better than 1.9 per cent the previous year.
On export growth, Kher said, “It is definitely an encouraging sign. There is a positive spirit and if this trend continues the next month, then I will definitely be saying that there is a revival (in global demand).” On exports target for 2014-15, he said, the trade data was encouraging, but it could be called a revival only if the trend continues for another month, Kher said. “The sectoral absolute numbers have began to acquire their natural levels,” Mr Kher added.
“We are working towards $1 billion exports on a daily basis.”
Source : dailyshippingtimes.com
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