Softening of global crude prices could have an impact on export growth and the country may find it difficult to reach the $350-billion shipment target set for 2018-19.
Crude prices are like a double edged sword as its spike impacts imports and the current account deficit. However, the softening of fuel prices affects shipments as it is a major contributor to the export basket.
“Maintaining export growth from November onwards will be a challenge. We expect the import bill to come down, but the bigger challenge is that the base effect of crude price will kick in along with lower crude prices and so maintaining a strong export growth will be a challenge,” Ajay Sahai, director-general and CEO of the Federation of Indian Export Organisations (FIEO), said.
India imports over 80 per cent of its crude needs. Oil imports in October totalled $14.21 billion, up 52.64 per cent from a year earlier, the data showed. Brent crude prices increased 39.66 per cent in October from the same period last year.
Petroleum exports contribute over 17 per cent of the country’s overall trade basket.
The trade deficit related to fuel items widened to $9.7 billion in October 2018 from $6.5 billion in September 2018.
Sahai said: “In the 17.86 per cent growth in exports in October, the net export, or the value of exports, is much less than the value in September, which was negative. In September, we suffered a negative growth. In October, we have a growth of around 17 per cent but still the value of exports in October is less than September”.
The October trade numbers showed that exports jumped over 17 per cent to $26.98 billion compared with $22.89 billion last year. However, when compared with September, the month-on-month dip was 3.47 per cent in October, down from $27.95 billion.
Analysts expect crude prices to moderate in the coming months and are likely to remain below $70 a barrel and exports could be in the region of 10-12 per cent.
However, the silver lining is the trade war between the US and China, which will provide a window of opportunity for Indian goods. Sahai said: “Reaching the $350-billion target would be difficult, but the trade war provides a glimmer of hope. It is allowing new markets for Indian products and opening up Chinese markets for products such as sugar and non-basmati rice.” Last fiscal, exports grew 9.8 per cent to $303 billion. In the April-October period this year, exports grew 13.27 per cent to $191 billion. Imports were up 16.37 per cent to $302.47 billion.