India Exports Fell in December for 3rd Straight Month

Feb. 2 (Bloomberg) -- India’s exports declined for a third straight month in December as the global recession reduced overseas orders, curbing growth in Asia’s third-largest economy.

Merchandise shipments dropped 1.1 percent to $12.7 billion from a year earlier, the government said in New Delhi today. Imports in December rose 8.8 percent to $20.3 billion, widening the trade deficit to $7.6 billion.

Falling exports may cause 10 million job losses by March, according to estimates from the Federation of Indian Export Organisations trade group, which would be a blow to Prime Minister Manmohan Singh’s re-election bid in polls in April and May. Exporters employ about 150 million people in India, the biggest provider of jobs after agriculture.

“The exports scenario won’t improve unless the global economy recovers,” said D. H. Pai Panandiker, president of RPG Foundation, an economic policy group in New Delhi. “Job losses in an election year are bad news for any incumbent government.”

Export growth may slow to 17 percent in the year ending March 31, compared with 25 percent a year ago, Trade Minister Kamal Nath told Bloomberg Television in an interview Jan. 29.

Exports gained 17.1 percent to $131.9 billion in the nine months to Dec. 31, today’s statement said. Oil imports fell 31 percent to $4.7 billion in December, while non-oil imports rose 32 percent to $15.5 billion, the statement said.

Export Finance

Bajaj Auto Ltd., India’s second-biggest motorcycle maker, said today exports rose 24 percent in January from a year earlier, almost half the pace in December.

To help exporters, the central bank in November extended the period for subsidized pre-shipment credit to nine months from six months and increased the export refinance limit for commercial banks.

Nath said Jan. 21 the government will soon unveil steps to end bureaucratic delays faced by exporters to spur overseas sales. He added that India will miss its exports target of $200 billion in the year to March 31.

“There will be job losses due to the global recession but I think domestic demand is going to help us,” Nath said Jan. 29.

Demand for made-in-Asia goods has slumped amid the deepening global economic slowdown. China’s exports in December dropped 2.8 percent, the most in almost a decade, while Singapore’s exports contracted the most since early 2002 in the same month.

Interest Rates

International trade will shrink in 2009 for the first time in more than 25 years as economic expansion slows and commodity prices slide, the World Bank said in December. World trade volumes will probably contract next year by 2.1 percent, hampered by exchange rate volatility and flagging import demand.

Measures to spur local consumption and investment began on Oct. 6 when the Reserve Bank cut the amount of money lenders need to set aside with the central bank. On Oct. 20, Governor Duvvuri Subbarao presided over the first interest-rate reduction in four years and the benchmark repurchase rate is now at a record low of 5.5 percent, down from 9 percent in July.

Prime Minister Singh’s government has also announced two fiscal stimulus packages which include tax cuts, the injection of capital into banks, and allowing overseas investors to double purchases of debt.

The Reserve Bank last month cut the growth estimate in India’s $1.2 trillion economy to 7 percent in the year to March 31 from between 7.5 percent and 8 percent it estimated earlier.