Indian exports fall as demand dampens

Overseas shipments in October dropped 12.1 per cent to $12.8 billion (Dh47 billion) from a year earlier, the government said in New Delhi on Monday. The last time exports fell was in October 2001, when they declined 7.4 per cent, according to data available on Bloomberg.

Exports may weaken further as foreign buyers stay away from India after the worst terror attacks in the country in 15 years last week. Minister Palaniappan Chidambaram, who switched to the home ministry today from the finance portfolio, said after the attacks that the government will provide help to textile, gems and jewellery exporters as overseas demand wanes.

diker, president at RPG Foundation, an economic policy group in New Delhi. "A fiscal package from the government for exporters looks imminent."

Terrorist attacks in Mumbai lasted until November 30, and left about 190 people dead.

Denis Wright, a British citizen and partner in Marc-Denis International LLC, a New York-based company that buys Indian cotton and beaded apparel and sells it in Brazil at wholesale and retail outlets, said "this will inflict really serious damage on business in India."

Going online

"Our company, like many companies, will do as much business on the Internet as possible and try to avoid going to India," said Wright, who has been visiting the country five times a year for 20 years and stays frequently at the Oberoi Hotel, one of the targets of the attacks.

The government wants to contain the damage to exporters to prevent job losses in an election year. General elections are due by May next year.

Textile exporters may cut about 500,000 jobs by April if overseas demand does not recover, according to India's textile ministry. India's merchandise exports make up about 15 per cent of India's $1.2 trillion economy.

The Reserve Bank of India last month announced steps to inject 220 billion rupees (Dh16.14 billion) into the financial system to help exporters. Among the steps it announced, the central bank agreed to extend the period for subsidised pre-shipment credit to nine months from six months and increased the export refinance limit for commercial banks.

India's exports in the seven months ending on October 31 rose 23.7 per cent from a year earlier to $107.8 billion, yesterday's report showed. Imports rose 36.2 per cent to $180.8 billion.

That brings the trade deficit to $72.9 billion, compared with $45.6 billion in the same period a year earlier.

India aims to reduce its export reliance on the European Union and the US and tap markets in Asia and Africa, according to the commerce ministry.

Asian neighbours

The US share of India's total exports declined to 10.3 per cent in the two months up to May 31, compared with 13.2 per cent a year earlier, according to the latest breakdown of overseas sales from the Reserve Bank of India.

In the same period, shipments to Asian countries increased to 30.9 per cent, compared with 30.2 per cent, according to the central bank.

Prime Minister Manmohan Singh says India can make up for slowing exports with higher domestic demand and average 8 per cent economic growth in the next five years.

Since October, the Reserve Bank of India has lowered its repurchase rate to 7.5 per cent from 8 per cent, reduced the amount of deposits that lenders need to set aside as reserves to 5.5 percent from 6.5 percent.

It has also cut the amount of money lenders are required to keep in government bonds to 24 per cent from 25 per cent, to stimulate demand.