No crisis on export front, no need for alarm, says Govt

New Delhi: Facing flak for 12 straight months of decline in exports, the government on Tuesday said there is "no crisis" in India on the export front and there is "no need for alarm".

"There is no crisis in India on the export front and while there is a need for caution, there is no need for alarm," the Commerce Ministry said in a statement.

The statement follows criticism by the Congress last month that India's exports dropped by a whopping 45 percent despite

Prime Minister Narendra Modi making 30 foreign visits in 18 months.

The statement said that a general sense of alarm has been generated by the publication of figures of India's exports in

the recent months.

Contraction in exports continued for the 12th month in a row in November which saw 24.43 percent decline in merchandise shipments to USD 20.01 billion amid a global demand slowdown.

Cumulatively during April-November 2015-16, the outward shipments dipped by 18.46 percent at USD 174.30 billion as against USD 213.77 billion in the same period last year.

It said that a closer look at the trade figures gives a satisfactory explanation for "divergence" in these figures.

Petroleum product exports have fallen by 52 percent due to steep decline in crude oil prices, it said, adding "if exports of petroleum products are excluded, then the decline in exports is only 9.6 percent in dollars".

Similarly, it said export of gems and jewellery products have fallen by 9.5 percent.

"In this case also there is a significant decline in raw material price, namely, gold. Hence the decline in exports in these categories are a reflection of changing import prices," it added.

"Thus the basic picture emerging is that excluding petroleum and gems and jewellery, India's exports have not declined significantly," it added.

While several sectors have shown a decline, it said some have shown increases such as ready-made garments of all textiles, carpets, handicrafts, pharmaceuticals and tea.

Further the statement said that the nominal decline must be compared with the rate of inflation.

For the purpose of measuring the real value of exports which are essentially wholesale transactions, it is the WPI rather than the Consumer Price Index which is more relevant, it said.

"When the export figure in rupees is compared with the average negative WPI inflation rate of (-) 3.3 percent, the fall in exports in real terms is likely to be negligible in volume terms," it added.

It said the fall in exports has to be viewed in the context of sluggish global trade volumes.

"If the drop in export is resulting in increased current account deficit or/and reduction in growth of GDP then there could be a need for alarm," it said.

The CAD is down to 1.2 percent of GDP from the "alarmingly high level" of 4.8 percent of GDP in 2012-13 and the rupee has gone from being one of the worst performing currencies to one of the best performing currencies against the dollar during the current financial year, the commerce ministry said.

Further, it said even though contribution of exports in GDP has declined to 21.2 percent in the first half of this fiscal from 25.2 percent in the first half of 2013-14, the growth in GDP during April-September of current financial year at 7.2 percent is higher than the growth of 6.6 percent recorded during 2013-14.

"Thus the drop in export has not reduced the pace of growth in the economy and it has been compensated by domestic demand," it added.

Citing example of engineering goods, it said exports have fallen by 14 percent in dollar terms but IIP data for April - October 2015 for capital goods shows a growth of 8.9 percent.

Ironically, the latest Index of Industrial Production (IIP) figures for October 2015 show considerable growth at 9.8 percent over the previous year, it said.

For the cumulative period April-October 2015, growth in IIP was 4.8 percent, more than double the growth recorded (2.2 percent during April-October 2014) in corresponding period during 2014, it added.