Merchandise exports in June fell 5.45 per cent year-on-year to $25.06 billion.

The fall – the third in four months since March – was largely due to the continuing weak demand in traditional markets such as Europe and the US as well as the deceleration in domestic manufacturing.

Imports also contracted 13.46 per cent to $35.37 billion, due to the drop in international oil prices resulting in a lower oil import bill.

Data released by the Commerce Ministry on Wednesday also showed that the fall in imports in turn led to the trade deficit for June narrowing to $10.3 billion from $14.4 billion in June 2011. This is the lowest level of trade gap in 15 months.

Exports for the first quarter this fiscal (April-June 2012) shrunk 1.7 per cent to $75.2 billion; and imports also fell 6.1 per cent to $115.26 billion. Trade deficit dipped to $40.06 billion from $46.3 billion during the first quarter last fiscal. Trade deficit for 2011-12 had hit a record $185 billion.

Oil imports during June were 4.43 per cent lower at $12.69 billion, while in the first quarter they were 5.48 per cent higher at $41.58 billion.

Imports of non-oil items, including capital goods, in June fell 17.8 per cent to $22.68 billion, while in the April-June period such imports had declined 11.57 per cent to $73.67 billion.

M. Rafeeque Ahmed, President, Federation of Indian Export Organisations (FIEO), said the modest recovery in industrial production during May will help exports in the next few months.

The incentives that the Government granted to exporters in the Foreign Trade Policy will take a little time to bear fruit, he said. He projected an over 30 per cent growth in exports in the second half of 2012-13.

“Moreover, the global situation is slowly improving and we expect exports to take-off by October,” he said, adding that he was confident of India’s shipments achieving the $350-billion target for the current financial year.

Ahmed also said the reduction in imports would help in managing the country’s trade deficit, which this fiscal would be below $150 billion.

Acknowledging the RBI’s move to relax norms on foreign exchange earnings and forwards contracts, he, however, said that the cost of credit was still a concern for the export sector and a general reduction in the interest rate would benefit manufacturing as well as exports.

Pointing out that there was a huge dip in world trade, Commerce Secretary S.R. Rao had said last month that said the depressing trend was likely to continue for the next two years.

“In the Euro Zone, we don't see any finality. Besides the distress in Greece, now we find that in Spain and Italy also their borrowings are more than their actual GDP. The sad news is that the American and the Chinese markets are also contracting. Japan is showing distress,” he had said.

> arun.s@thehindu.co.in

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