India’s Exports Decline the Most in at Least 13 Years (Update1)

April 1 (Bloomberg) -- India’s exports fell the most in at least 13 years in February as recessions in the U.S. and Europe damped demand for the nation’s products.

Merchandise shipments dropped 21.7 percent from a year earlier to $11.9 billion, the government said in New Delhi today. That was the biggest decline since 1995, according to Bloomberg data. Imports fell 23.3 percent to $16.8 billion, narrowing the trade deficit to $4.9 billion.

Policy makers in India have injected about $85 billion into the economy by cutting taxes and interest rates ahead of elections to be held in April and May. Prime Minister Manmohan Singh joins leaders of the Group of 20 nations in London tomorrow to hammer out a solution to the world economy’s worst crisis since the Great Depression.

“India essentially only started feeling the pinch of the global downturn in the December quarter and the worst is yet to come,” said Sherman Chan, an economist at Moody’s Economy.com in Sydney. The economy is likely to grow by 6.3 percent in the 12 months to March, less than the government’s estimate of 7.1 percent, she said.

Global trade will plunge 9 percent this year, the most since World War II, the World Trade Organization said last week. Declining exports will slow economic growth in Asia to the weakest since the 1998 financial crisis, the Asian Development Bank said yesterday, cutting its forecast for the second time in four months.

Global Recession

Asia is being hit hard by the global recession as the region is almost twice as reliant on exports as the rest of the world. Japan’s overseas sales plunged a record 49.4 percent in February from a year earlier and China’s shipments tumbled 25.7 percent in the same month.

India’s overseas sales in the 11 months to Feb. 28 rose 7.3 percent to $$156.6 billion, today’s report showed. Imports in the same period increased 19.1 percent to $271.7 billion.

“The global economic downturn adversely affected foreign clients’ confidence and as a result new work from abroad fell at a considerable pace,” Gaurav Kapur, an economist with ABN Amro Bank NV, said in a report today. Output at factories and utilities also contracted in March on weak external demand, according to ABN Amro.

Efforts to protect India from the impact of the global slump started in October when central bank Governor Duvvuri Subbarao cut the key interest rate for the first time since 2004. The Reserve Bank of India has lowered the repurchase rate five times to an all-time low of 5 percent.

Stimulus Packages

Prime Minister Singh for his part has announced three stimulus packages to spur slowing demand. Initiatives have included tax cuts on consumer products and services and higher spending on roads, ports and utilities.

Declining overseas orders and shrinking local demand caused growth to slow for the third straight quarter. The $1.2 trillion economy grew 5.3 percent in the three months to Dec. 31, the weakest pace of expansion since the last quarter of 2003, after 7.6 percent growth in the previous quarter and 7.9 percent in the three months before that.

Slowing external demand suggests India’s economic growth “will moderate more than we had earlier thought,” Governor Subbarao said last week.

Oil imports fell 47.5 percent to $4.04 billion in February, while non-oil imports fell 10.2 percent to $12.7 billion, the statement said.

The collapse of the nation’s exports led to India’s current-account deficit widening to a record in the three months to Dec. 31, the central said in a report yesterday. The shortfall in the broad measure of trade and investment flows swelled to $14.64 billion in the three months through December, from $12.82 billion the previous quarter.