India’s exports snap 18-month fall in June on weak rupee

Exports in India snapped 18-month fall in June, while imports continued to decline for the 19th straight month in a row as weakness in rupee made imports cheaper for other countries, thereby boosting exports of the Indian sub-continent.

India’s merchandise exports rose 1.27 percent y/y in June to USD22.57 billion, reversing a trend that started in December 2014, while imports contracted for the 19th month in a row, down 7.3 percent to USD30.7 billion, generating a trade deficit of USD8.1 billion, the highest in six months.

Oil imports in India during the month of June fell 16.4 percent while non-oil imports dropped 4.1 percent. During the first quarter of the fiscal year, India’s exports contracted 2.1 percent to USD65.3 billion while its imports dropped 14.5 percent to USD84.5 billion, leaving a trade deficit of USD19.2 billion.

Rupee depreciated over nine percent since January last year that propelled overseas economies to demand more of cheaper Indian goods and also imports became costlier that led to a decline in Indian consumers demanding foreign products.

In June, exports of 17 of India’s top 30 export items grew. Among the major items, export of pharmaceuticals (0.07 percent), chemicals (14.4 percent) and engineering goods (0.9 percent) increased, while gems and jewellery (-0.49 percent), readymade garments (-0.78 percent) and petroleum products (-10.8 percent) declined.

Gems and jewellery had shown significant growth in May, growing at 24.34 percent. However, higher exports of petroleum products, USD2.6 billion in June against USD2 billion in May and crops such as tea, coffee, rice and oilseeds helped boost overall exports.

Shipments of 13 of the 30 top import items grew in June. Among the major items, imports of plastic (1.6 percent), machinery (1.8 percent), transport equipment (11 percent) and electronic goods (9.4 percent) grew, while coal (-13 percent), petroleum (-16.4 percent), chemicals (-4 percent), pearls (-13.5 percent), iron and steel (-16.7 percent) and gold (-38.5 percent) declined.

Meanwhile, contraction in gold imports amid continuous benefit from a lower oil import bill, suggest a likelihood of a current account surplus in the first quarter of 2016-17, according to a statement by Aditi Nayar, Senior Economist at Icra Ltd. However, Brexit is expected to dampen situations in the coming quarters, which may exert pressure on the Indian exporters.