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Grim Foreign Trade Results

India’s exports and imports suffer a setback

India’s foreign trade data for the month of March, financial year 2009, is out and the result is a huge negative, both on exports and imports fronts.

That there would be a damaging trend in exports was a given, considering that the global economic crisis had virtually put a lid on demand everywhere. Also, bearing in mind that Indian exports are dependent on the demand in US and West European countries, which are undergoing almost-never-seen-before growth pangs, it was a foregone conclusion that there would be red ink everywhere. But even on the import front, the falling figures indicate the slowdown that has affected India has made Indian corporate shun expenditure—in any case falling demand in India and abroad would have given them a reality check.

As a result, exports for March stood at Rs 58,997 crore, which is 15.3 per cent lower than the exports of the corresponding month last year which were at Rs 69,630 crore. Imports too witnessed a decline to the tune of 16.2 per cent in March 2009 and were at Rs 79,717 crore as against Rs 95,134 crore in March 2008. If you calculate the same in dollar terms, then the fall in exports and imports for the month of March, 2009 is a whopping 33 per cent and 34 per cent respectively.

However, cumulatively, exports grew 16.9 per cent from Rs 6, 55,863 crore in financial year 2008 to Rs 7, 66,935 crore in financial year 2009 and imports grew 29 per cent from Rs 10,12,312 crore to Rs 13,05,503 crore.

The trade deficit for March 2009 is lower at Rs 20,720 crore as against Rs 25,504 in March 2008. On a cumulative basis, trade deficit is 51 per cent higher at Rs 5, 38,568 crore for FY09 as against Rs 3, 56,449 crore deficit for the FY08.

All this comes mainly due to weak external demand and as a result, the country’s economic growth has been decelerating. Efforts to counter these ill-effects started in October 2008 when RBI Governor Duvvuri Subbarao cut the key interest rate for the first time since 2004. Apart from this, three stimulus packages have been announced by the central bank to stimulate demand.

India has been adversely affected by the global recession. It is clearly visible that India’s foreign trade has suffered a setback. While on one hand, trade deficit has widened; on the other, exports and imports have contracted. The collapse of the nation’s exports has led to India’s current-account deficit widening.