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Q1 exports slow sharply on weak global demand

India's exports growth slowed to a mere 1.76 per cent in the April-June first quarter as a sluggish global economy and rising competition took its toll, and analysts warned of more pain ahead.

Growth in the corresponding period a year ago was a hefty 28 per cent.

Exports grew to $10.52 billion in April-June quarter from $10.34 billion in the year ago quarter, government data released on Wednesday showed.

Exports in the month of June were down 4.63 per cent at $3.29 billion from $3.45 billion in the same month a year earlier.

In the last 2000-01 financial year, India's exports grew by a healthy 20 per cent year on year helped by a buoyant global demand.

Analysts said the single digit growth was anticipated as the global slowdown, especially in the US economy, did not bode well for Indian exports.

"The trend is more or less expected. We are not looking at a 20 per cent growth as was seen last year, one because of the last year's higher base," said Indranil Pan, associate vice president with the Bombay based Kotak Mahindra Capital.

"Secondly, the slowdown in the rest of the world is affecting demand for goods from India," he added.

The slowdown in the US and Japanese economies has been a cause of concern as they are India's main export markets.

Last year's buoyant exports helped offset the $49.8 billion import bill and restrict the trade deficit to $5.73 billion. Strong foreign investment flows also helped the country post a balance of payments surplus of $5.86 billion in 2000-01.

Implications for growth

Imports have also been sluggish this year, and while that could be a positive factor for India's perennial trade account deficit, analysts also worry it signals industrial production is not picking up.

Imports in the April-June quarter fell 2.4 per cent to $12.44 billion. The rupee, convertible only on the current account has fallen just one per cent since April.

The economy is also in the grips of deep slowdown with industrial growth in May a dismal 1.9 per cent over the previous year, while policymakers and economists are hoping that the monsoon, which have been normal so far, will boost rural spending.

Merchandise exports form just around 10 per cent of India's gross domestic product, but with other major sectors lagging, had helped the economy last year.

GDP growth fell sharply to 5.2 per cent in 2000-01 from 6.4 per cent and 6.6 per cent in the two preceding years.

"The export decline of 4.6 per cent in June is definitely worrying. With domestic demand sluggish a slowdown in exports could affect GDP adversely," M R Madhavan, head of research at Bank of America, said.

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