Press Information Bureau

Government of India

Ministry of Finance

25-February-2011 12:15 IST

India’s Cumulative Export Growth in April-Dec 2010-11 Stood at 29.5 % with US$ 164.7 Billion of Exports

Rs 2,23,132.31 Crore Exports from SESs During first Three Quarters with Total Employment at 6,44,073

The Economic Survey tabled in the Lok Sabha here today by the Finance Minister, Shri Pranab Mukherjee says that India’s cumulative export growth in April-December 2010-11 stood at 29.5 per cent with cumulative exports reaching US $ 164.7 billion during this period. The exports continued to rise with exports rising at the rate of 13.6 per cent in 2008-09. Current indications are that India will not only achieve the target of US$ 200 billion but surpass it in 2010-11. During 2010-11 (April-December) import growth was at 19 per cent accompanied by an increase in both petroleum, oil, and lubricant (POL) and non-POL imports at 17.7 per cent and 19.6 per cent respectively. Trade deficit (on customs basis) increased by 2.4 per cent to US$ 82 billion in 2010-11 (April–December) from US$ 80.1 billion in the corresponding period of the previous year. The relatively higher import growth compared to export growth in the first half of 2010-11, raised the alarm of a possible unmanageable current account deficit. With import growth slowing down from October 2010 and exports picking up in November 2010, the fear that the high current account deficit may be due to high merchandise trade deficit is disappearing.

The Survey observes that the direction of India’s trade with USA, which was in first position in 2007-08, has been relegated to third position in 2008-09, with the UAE becoming India’s largest trading partner, followed by China. This position continued in 2009-10 and the first half of 2010-11 In both 2009-10 and 2010-11(April-September), India’s exports to the UAE were higher than imports, while its exports to China are lower than imports. Export-import ratios show that among its top 15 trading partners, India had bilateral trade surplus with five countries, namely the UAE, USA, Singapore, the UK, and Hong Kong in 2009-10 and the first half of 2010-11. India’s export-import ratio in the case of China is not only low but has been stagnating at around 0.3.

While India ranks 21st in world merchandise exports in 2009 compared to China in first position, in commercial services exports it ranks 12th compared to China at fifth rank. Services exports reached US$ 106 billion in 2008-09 with a moderate growth of 17.3 per cent over the previous year but declined to US$95.8 billion in 2009-10. The share of software services declined to 45.7 per cent in the first half of 2010-11 from 50.8 per cent in the corresponding period of 2009-10. This was a result of moderate growth of 14.7 per cent in the first half of 2010-11 and the revival of non-software services exports. Non-software services exports which had registered a high negative growth of - 41.2 per cent in 2008-09 increased their share to 29.5 per cent with high growth of 56.9 per cent. The revival of this sector is a good sign, though it is partially due to the base effect. The falling services trade surplus however is adding to the woes on the current account deficit front, instead of acting as a cushion as was the case earlier, the Survey notes.

According to the Survey, Trade policy measures taken by the Government and the RBI in 2009-10 and 2010-11 focused on reviving exports and export-related employment besides mitigating the effect of inflation. The Government followed a mix of policy measures including fiscal incentives, institutional changes, procedural rationalization, enhanced market access across the world, and diversification of export markets.

Exports of SEZs during the first three quarters of the current year have been to the tune of Rs 2,23,132.31 crore. Out of the total employment to 6,44,073 persons in SEZs, an incremental employment of 5,09,369 persons was generated after February 2006 when the SEZ Act came into force. Some issues related to SEZs include the deadlines under the Direct Tax Code (DTC), goods and services tax (GST)-related issues, coordination issues, and privatization of Government SEZs, the Survey adds.

Growth in world trade volume is expected to moderate in 2011 and 2012 to 7.1 per cent and 6.8 per cent respectively, as per IMF projections. However, the trade growth in emerging and developing economies is expected to be more robust than that in the advanced economies in 2011 and 2012. The outlook for India’s trade sector has brightened with a good growth of 29.5 per cent in 2010-11 (April-December) and a robust growth of 36.4 per cent in December 2010. However, this bright picture needs to be moderated on account of the recent developments in world trade, though transient in nature at present, like the financial turbulence in the periphery of the euro- zone and the new disturbances in the Middle East resulting in oil prices (Brent) crossing the US $ 100 mark. Further, while world merchandise trade picked up in the first half of 2010, there was a slowdown in the third quarter of 2010 due to the base effect and drying up of fiscal stimulus. There is also a need to guard against new protectionist measures. Though, many of these are on the decline, those already in place need early winding up. While the potential for India in trade is great, the challenges are also aplenty, says the Economic Survey.

DSM/RM/RJ/AS - 5

Export Growth signals robust recovery supported by policy measures, while SEZ regulatory issues and services trade pressures persist. India's merchandise export recovery in April-December 2010-11 strengthened cumulative exports and employment, supported by fiscal incentives, institutional reforms and market diversification, while import growth and petroleum imports widened the customs trade deficit. Services exports saw a reduced software share and a revival of non software services, but a falling services trade surplus increased current account pressure. SEZs delivered large export value and incremental employment after the SEZ Act, yet regulatory issues linked to the Direct Tax Code, GST integration, agency coordination and SEZ privatization remain outstanding.