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Narrows to $13.98 billion in September; exports contract 2.15%, imports grow 10.45%
India’s trade deficit narrowed to a five-month low at $13.98 billion in September despite higher oil prices, even as merchandise exports entered negative territory after a gap of six months.
Data released by the commerce ministry on Monday showed that exports contracted 2.15% in September while imports grew 10.45% in dollar terms. In rupee terms, however, exports and imports expanded at 9.65% and 23.78%, respectively, mostly because of a sharp depreciation in the rupee.
Commerce secretary Anup Wadhawan said the dip in merchandise exports in dollar terms is due to a higher base in September last year when exports grew at an “abnormally high” 26% due to imminent cuts in pre-goods and service tax (GST) duty drawback rates. “This is a temporary phenomenon. Exporters continue to be resurgent with their realised incomes having gone up by almost 10%. October figures promise to be as per the ongoing six-month trend in dollar terms,” he said.
India’s trade deficit narrowed to a five-month low at $13.98 billion in September despite higher oil prices, even as merchandise exports entered negative territory after a gap of six months.
Data released by the commerce ministry on Monday showed that exports contracted 2.15% in September while imports grew 10.45% in dollar terms. In rupee terms, however, exports and imports expanded at 9.65% and 23.78%, respectively, mostly because of a sharp depreciation in the rupee.
Commerce secretary Anup Wadhawan said the dip in merchandise exports in dollar terms is due to a higher base in September last year when exports grew at an “abnormally high” 26% due to imminent cuts in pre-goods and service tax (GST) duty drawback rates. “This is a temporary phenomenon. Exporters continue to be resurgent with their realised incomes having gone up by almost 10%. October figures promise to be as per the ongoing six-month trend in dollar terms,” he said.
The government last month raised import duties on 19 non-essential items, including refrigerators, air conditioners, jewellery, diamonds and jet fuel, accounting for annual imports worth ?86,000 crore, to arrest a widening current account deficit (CAD) and a weakening rupee. Last week, it increased customs duty on a host of items, including telecommunication equipment, from the existing 10% to 20%. Wadhawan defended the measure, saying India has raised custom duties well within its permissible bound rates at the World Trade Organization and, hence, cannot be termed protectionist unlike some developed countries.
India’s CAD worsened to 2.4% of gross domestic product (GDP) in the first quarter of 2018-19 and economists expect it to worsen to 3% for the full year. With large-scale capital outflows, financing the deficit is also a challenge, though India’s forex reserves are more than adequate.
Icra estimates India’s CAD to triple to a substantial $19-21 billion in July-September quarter of 2018-19, or around 3% of GDP, from the modest $7 billion during the same period a year ago. WTO has downgraded growth in global merchandise trade to 3.9% in 2018 from the earlier estimate of 4.4% because of the escalating trade tensions between the US and China.
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Despite, Free Trade Agreements (FTA’s) and Preferential Trade Agreements (PTA’s), India’s textile trade has not been performing well, said Aditi Das Rout, Trade Advisor, Ministry of Textiles.
Speaking at a meeting organized by Indian Texpreneurs Federation in Coimbatore, she said India’s textile and clothing exports are almost stagnant for the last five years.
She said that India has 10 Free Trade Agreements and six Preferential Trade Agreements and despite that our trade has underperformed. Such agreements look at various issues and compliance that prove expensive for the small and medium-scale businesses.
The textile and clothing industry is largely fragmented and is with SMEs, she added.
Suggesting measures, Rout said “We need to analyze why our trade has not performed despite the agreements.”
She also urged the industry to diversify into new markets and products, using branding as an effective tool, and invest to achieve economies of scale.
Highlighting the textile exports market for India, Rout said that the top destinations for the textile and clothing exports from the country are the US and the European Union. Substantial exports are also to emerging markets such as the UAE, Bangladesh, and China. Nearly 63 % of the exports are to markets where there are no free trade agreements.
Thus to give exports more visibility she said “Ministry of Textiles plans to handhold SMEs with trend forecasting services and have display locations and warehouses in potential and emerging markets.”
Keshav Chandra, Joint Secretary in the Union Ministry of Commerce, said the Government is working on a National Trade Portal and first module of the portal is expected to be up and running from August-September next year with the focus on four dimensions – logistics, online certification systems, financial systems, and compliances.
He said that textile and clothing exporters are struggling to compete with countries such as Vietnam and Bangladesh.
Quoting the reasons, he said that there is lack of nimbleness in the industry and government, which needs to be focused on,
“We are not fast enough to see what the next option is,” he said.
Further, he suggested having a focused group for each country and study the export-import trends and issues.
At the meeting, Indian Texpreneurs Federation presented a report on “Competition Analysis and Way Forward for FTAs for Indian Textile Sector”.
According to the report, India faces competition from Pakistan mainly because Pakistan receives zero duty market access in EU. In general, the country’s textile and clothing exports have tariff disadvantage ranging from 1 % to 40 %.
The way forward is to seek better market access under current FTA negotiations and have mutual recognition agreements with major export markets to combat impact of non-tariff barriers, report suggested.
Govt says decline due to base effect; exporters want higher credit flow
After a positive run in the first five months of this fiscal, the country’s goods exports fell 2.15 per cent to $27.95 billion in September 2018 (year-on-year). The government is hopeful that the decline is temporary, owing largely to a high-base effect.
Imports registered an increase of 10.45 per cent to $41.9 billion during the month, bringing down the trade deficit to $13.98 billion, according to data released by the Commerce Ministry on Monday.
“The decline in exports is a temporary phase. In October, we will see good growth in dollar terms and will match the current trend,” Commerce Secretary Anup Wadhawan told reporters.
Wadhawan pointed out that export growth was down in September 2018 as in the comparable last month there was an abnormally high growth of 26 per cent due to the cut-off for drawbacks at pre-GST rates.
According to exporters’ body FIEO, overall exports in September at $28 billion is the minimum needed to reach the $350-billion mark milestone in 2018-19.
“We reiterate our demand for augmenting the flow of credit to the export sector as a sharp decline in credit does not augur well for the future when exports are growing in double digits,” he said.
Despite the fall in exports, a number of items posted an increase, including petroleum products, chemicals, drugs & pharmaceuticals, cotton yarn & fabric, handloom products and plastic.
In the first six months of the current fiscal, exports posted a growth of 12.5 per cent in dollar terms. Imports grew 16.1 per cent.
Last month, the Commerce Ministry had roughly estimated export growth for 2018-19 to be about 16 per cent, which was the average growth figure for the April-August 2018-19 period.
Exports grew 9.8 per cent in 2017-18 to $302.84 billion.
Merchandise exports grow 19.93% in rupee terms and 12.54% in dollar terms
India’s trade deficit shrank to its lowest in five months in September, at $13.98 billion, even as exports contracted for the first time in as many months, according to official data released on Monday.
The data from the government’s mid-year assessment of India’s trade shows that merchandise exports registered a growth of 19.93% in rupee terms and 12.54% in U.S. dollar terms.
“Merchandise trade deficit is $13.98 billion in September 2018, lowest in last five months, despite high oil prices,” the government said in a statement.
“Merchandise exports in September 2018 exhibited a positive growth of 9.65% in rupee terms. In dollar terms, there was a marginal negative growth in merchandise exports of 2.15% in September 2018.”
“This decline is entirely due to the base effect resulting from September 2017 being an abnormally high growth month of about 26% in dollar terms due to the imminent cut off then for drawbacks at pre-GST rates,” the statement added.
“Though the data shows a marginal negative growth in the month of September, primarily due to high base effect last year, the aggregate value of exports in this September is much more than in the month of April, June and July of 2018 in which we recorded as high as 17% growth,” said Ganesh Kumar Gupta, president of the Federation of Indian Export Organisations.
Petroleum rises
During September, the major commodity groups that saw a strong export growth included petroleum products (26.8%), organic and inorganic chemicals (16.9%), drugs and pharmaceuticals (3.8%) and cotton yarn/fabs./made-ups, handloom products, etc. (3.6%) and plastic and linoleum (28.2%) in dollar terms. “Imports in April-September 2018 exhibited a positive growth of 16.16% in U.S. dollar terms,” the statement said.
Powerloom Development & Export Promotion Council (PDEXCIL) has again come up with a grand Reverse Buyer Seller Meet (RBSM) to promote export of textiles and garments, connecting the international market with Indian textile exporters and traders.
IITExpo Ichalkaranji 2018 will be a one stop source for all textiles requirements of worldwide buyers and a unique platform for Indian participants where they can gather information on all latest developments and trends in order to gear the development and manufacture of their products in future. The main objective of conducting this RBSM is to provide a direct platform to Indian textiles exporters to interact with buyers from all over the world in their home country at a very low participation charge.
The SME sector is highly motivated to participate in it and increase their export activity. Also it will showcase India as a reliable source of supply with such varied product range.
Under one roof About 100 Indian textile exporters will be displaying a wide range of products with latest trends and qualities.
The exhibition is happening in Ichalkaranji, a city in Kolhapur district of Maharashtra and one of the India’s important textile/fabric manufacturing clusters with over 1,50,000 powerlooms. It is having 35 spinning mills many of which are 100% Export Oriented Units producing a wide range of counts, ply yarns, ring and open end yarns and fancy yarns, more than 20 power processes and about 50 hand processing units. The Cluster will be now set-up by a Mega Processing Cluster to address the environmental norms. With the vision to provide a reliable international network platform and practical know-how on all key sourcing markets, latest trends and standards in export, buyers from various countries are invited such as Sri Lanka, Bangladesh, U.A.E, Vietnam, Korea, Senegal, Zimbabwe, Mali, Malaysia, Australia etc.
Industrialists have reminded the government of its pre-poll promise of providing electricity to all industrial units in the state at Rs 5 per unit.
A leading yarn manufacturing unit proprietor Kamal Dalmia said the government offered Rs 5 per unit base rate to industry, while they have to pay the fixed cost separately, which takes the power tariff to Rs 7.30 per unit. What is making matters difficult for them is that the lesser they run their industrial unit, higher is the power tariff that they are forced to pay.
He said still there was respite compared to domestic users where the tariff is Rs 10.50 per unit. However, it is yet on higher side in comparison to neighbouring states
In addition, there is around two-hour daily power cut on industries. It forced them to switch over to diesel-run power generators which cost about Rs 25 per unit.
He added that the hiked diesel cost was also telling upon the raw material coming from outside state. The price of polyester filament yarn and nylon filament yarn has recorded around 20 per cent rise in its prices during the last six months.
Industrialists have sought supplying of power at lower rates to revive the vanishing industries in the state.
Punjab Pradesh Beopar Mandal (PPBM) president PL Seth said the industry was going through a rough patch as majority of the units reached stagnation and were beset with high running cost and intense competition from outside.
He said post-independence, Amritsar has seen vanishing of its textile processing, fan manufacturing, carpet weaving and pharmaceutical industrie.
These labour intensive industries offered jobs to skilled, semi-skilled and unskilled labourers. It even attracted migrants from states like UP and Bihar to come to holy city to earn their livelihood.
Brent crude futures were down 66 cents, or 0.8 percent, at $82.43 a barrel by 0024 GMT. The global oil benchmark closed 2.2 percent lower on Wednesday after falling to a nearly two-week low.
Oil dropped on Thursday to extend big losses from the previous session as global stock markets suffered a rout, with crude prices also taking a hit from a weekly industry report showing US crude inventories had risen more than expected.
Supply worries also eased as Hurricane Michael likely spared oil assets from significant damage as it smashed into Florida, even as it caused injuries and widespread destruction. Brent crude futures were down 66 cents, or 0.8 percent, at $82.43 a barrel by 0024 GMT. The global oil benchmark closed 2.2 percent lower on Wednesday after falling to a nearly two-week low. US West Texas Intermediate (WTI) crude futures were down 57 cents, or 0.8 percent, at $72.60 after dropping 2.4 percent in the previous session.
Stocks on major world markets slid to a three-month low on Wednesday, with the benchmark S&P500 stock index falling more than 3 percent, its biggest one-day fall since February.
Technology shares tumbled on fears of slowing demand and concerns about US-China tensions. Japan’s Nikkei 225 was down 3 percent in early trading on Thursday.
“Ugly, very very ugly,” Greg McKenna an independent market strategist based near Sydney said in a morning note, referring to declines in global markets.
US crude stockpiles rose more than expected last week, while gasoline inventories increased and distillate stocks drew, industry group the American Petroleum Institute said on Wednesday.
Crude inventories climbed by 9.7 million barrels in the week to Oct. 5 to 410.7 million, compared with analyst expectations for an increase of 2.6 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 2.2 million barrels, API said. The US Energy Information Administration (EIA) is due to release official government inventory data Thursday at 11 a.m. EDT. In the US Gulf of Mexico, producers have cut daily oil production by roughly 42 percent due to the storm, the Bureau of Safety and Environmental Enforcement said. The cuts represent 718,877 barrels per day of oil production.
While production has been cut because of the hurricane, “down time is expected to be brief and Gulf of Mexico output now accounts for a comparatively small portion of total US production,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note. US oil output is expected to rise 1.39 million bpd to a record 10.74 million bpd, the EIA said in its monthly forecast on Wednesday.
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With the import components of major exports becoming costlier and significant goods and service tax (GST) refunds yet to be released, Indian exporters claim the benefits of a weaker rupee are eluding them.
The rupee has reduced by 15 per cent since the start of the year. Continuously falling for the past six months — the longest such stretch since 2002 — the currency ended at 74.28 to the US dollar on Wednesday. A weaker currency generally denotes better prospects for exports as goods become competitive vis-a-vis competing nations.
“But contrary to popular perception, this depreciation has not benefited exports to the extent that the public expects, since a lot of exporters have already hedged their risk while exporters taking credit in foreign currency are being asked to surrender the equal differential in cash owing to exchange rate fluctuation,” Federation of Indian Exports Organizations (FIEO) President Ganesh Kumar Gupta said on Wednesday.
Exporters are also yet to receive Integrated GST refunds worth Rs 80-100 billion. On the other hand, states continue to refuse input tax credit, which have piled up to 150 billion, he added. Getting states to pay up their share of the levy has also remain difficult. States such as Andhra Pradesh, Uttar Pradesh, Bihar and Chhattisgarh have said they are out of funds to pay exporters, he added.
This continues to disproportionately hit small, medium and micro traders, who are still overlooked by banks while providing trade credit, Gupta added. On the other hand, competing economies are not far behind. “Despite India remaining the worst performing currency in the Asia-Pacific region, many other currencies such as Argentinian peso, Brazilian real, Russian ruble, South African rand and especially the Turkish lira, have depreciated at much faster pace giving increasing competition to India in specific sectors such as agriculture, metal and textiles,” Ajay Sahai, director general at FIEO, said.
Buyers from Africa, Middle East, Latin America, Asia are generally asking for discounts adversely affecting exports and exporters generally suffer due to currency volatility, he added.
However, India may clock export growth of 20 per cent in rupee terms in 2018-19, according to FIEO.
The government has tried to stop the slide, by making it easier for foreign investors to buy rupee bonds by Indian companies and raising tariffs on imported goods to stem the flow of money out of the country. On the latter issue, regular inter-ministerial meetings are being held. India’s exports managed to cross the $300-billion target for the first time in two years in 2017-18. In the April-August period of the current financial year, exports have risen by 16.13 per cent to $136.09 billion, up from $117.19 billion in the same period of the last fiscal year.
However, there were no signs of built-up stress reducing in certain labour-intensive sectors such as apparels. Export of readymade garments continued to contract in August, going down by 3.35 per cent. Industry experts pointed out that the sector has seen a downturn since October, 2017. Another major export earning sector, gems and jewellery, saw shipments rise by 23.95 per cent, lower than the 24.62 per cent growth rate in July. The sector had returned to the growth charts in June after months of contraction.
Cotton prices soared further on Wednesday – up by Rs250 per maund for official rates – driven by a steep fall in rupee value against the dollar. Overall trading activity slowed down on the cotton market.
On ready counter trading prices shot up to Rs8,700 per maund – an indication that lint rates would rise further in coming days particularly when imports have become costlier due to devaluation of the rupee against dollar.
Phutti (seed cotton) prices also soared with Sindh quality being quoted between Rs3,700-4,000 per 40kg, Pun¬jab in the range of Rs3,700-4,300 and Baloch¬istan between Rs3,800-4,200.
Market sources said the cotton yarn and fabric markets were also tight with dealers generally preferring to hold on to their stocks in the hope of reaping higher profits given that prices in most commodity markets are rising.
On the global front, New York cotton earlier in the morning recovered partially but towards the closing stages once again declined. The Chinese market also closed easy.
The Karachi Cotton Association (KCA) spot rates were revised upward by Rs250 at Rs8,400 per maund.
The following deals were reported to have changed hands on ready counter: 1,200 bales, station Saleh Pat, at Rs8,650; 3,000 bales, Khairpur, at Rs8,500-8,550; 1,000 bales, Rahim Yar Khan, at Rs8,650; 2,000 bales, Rajanpur, at Rs8,500-8,600; 1,400 bales, Fazilpur, at Rs8,500-8,600; 1,000 bales, Khanewal, at Rs8,600; 1,000 bales, Bahawalpur, at Rs8,500; 600 bales, Fort Abbas, at Rs8,500; 800 bales, Burewala, at Rs8,150-8,300; and 600 bales, Haroonabad, at Rs8,300.
Due to shortage of water during Kharif season, Punjab could miss over 15 percent while Sindh could have 32 per cent lesser yield of cotton, Senate Standing Committee on Food Security was told on Wednesday.
The meeting was held under the chair of Senator Syed Muzaffar Hussain. Secretary Pakistan Central Cotton Committee briefed the meeting on expected shortfall in production of cotton in the current Kharif season, and the reasons as why the country failed in evolving quality certified seeds which could enhance production and progress after the Plant Breeders Act 2016.
The committee was informed that extraordinary shortage of water during Kharif season had adversely affected cotton sowing. However, Punjab achieved 85 percent of the target and Sindh achieved 68 percent of the target.
While discussing reasons as why Pakistan failed to produce quality certified seeds, the officials said the BT cotton varieties contained Boll Gourd gene that was losing effectiveness. The cotton crop has a number of new challenges such as high temperatures, unexpected rains and resistance to new pests and diseases, the officials said.
Discussing progress after the passage of the Plant Breeders Act 2016, it was revealed that a meeting was held with multinational companies and their Association, Crop Life, at the Ministry on September 26. Officials said that the companies showed no interest in setting up cotton seed business in Pakistan
Chairman of the Committee directed Chairman NARC to submit a report on contribution made by the institute on seed research on various crops. He said that even the Prime Minister had shown concern that Pakistan was falling back on Indian imports for the seeds of major crops. He directed that this report must be submitted within a week.
One of the major reasons for the shortage of cotton crop against the target is higher pesticide prices, he said. He asked Pakistan Central Cotton Committee to make recommendations to address the issue so that the cost of production in cotton circulation might be contained. While discussing water shortage in the Indus System, Chairman Syed Muzaffar Hussain Shah directed that IRSA should submit terms of reference regarding its meeting with the Council of Common Interest (CCI). He further instructed that the meeting of committee of the Attorney General which is due soon, must deliberate on the issue of flood canals and their opening in the wake of acute water shortage in the system. He also stressed the need to enquire whether the opinion of the lower riparian was sought on opening these canals which affect growers in the region.
