India's export slump casts shadow on growth prospects

India's exports slumped for the fifth straight month in April from a year earlier, dragged down by fall in global demand that has cast a shadow over Prime Minister Narendra Modi's goal of achieving over 8 per cent growth in 2015/16 fiscal year.

The ongoing weakness in merchandise exports, which account for about 16 per cent of India's roughly $2 trillion economy, will weigh on January to March economic growth numbers due to be released on May 29.

Modi sees manufacturing and export-led growth as the best way to create jobs for the millions of young people who helped him gain power last year.

He aims to almost double goods and services exports to $900 billion in the next four years.

But merchandise exports contracted 14 per cent in April.

The trade deficit narrowed to $10.99 billion as oil imports declined by more than 42 per cent from a year earlier, data released by Ministry of Commerce and Industry showed on Friday.

Exporters said falling global commodity and crude oil prices had so far partly offset their lower overseas sales, but they fear more gloom -- as demand is falling further, particularly in oil exporting and Latin American countries.

"There is a fall in order booking for coming months, particularly from buyers in the Middle East, Africa and Latin American countries," said Ajay Sahai, a senior executive at the Federation of Indian Export Organisations.

He warned that exporters could be forced to lay off workers if sales orders continued to decline over the next 4-5 months.

Some relief could come from the Reserve Bank of India, which has cut policy rates twice this year to 7.5 per cent because of slower consumer inflation, and is expected to make borrowing cheaper again when it meets for a policy review on June 2.

To counter slack global demand, Modi has vowed to modernise overloaded roads, ports and railways in a bid to make India's exports more competitive. This week, he is visiting top trading partner China, hoping to invigorate exports.

India's economy expanded 7.5 per cent year-on-year during the three months ending in December, higher than China’s 7.3 per cent growth recorded in that quarter.

(Additional reporting by Aditya Kalra)

Image: A man sells the Indian tricolour; Photograph: Reuters