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Exports shrink, rupee pressured

business Updated: Jan 01, 2009 21:33 IST
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The red signal on the external front turned a deeper shade on Thursday as exports fell for the second month in a row. The 9.9 per cent year-on-year fall in November was ominous for policy-makers trying to revive growth from a slowdown because the government also faces a high fiscal deficit that curtails its spending power.

Nervous exporters are struggling to ink new contracts as demand shrinks following growing bankruptcies in the US---India’s largest export market. India exported goods worth $158 billion in 2007-08, but appears unlikely to meet this year’s target of $200 billion. But a weaker rupee could aid exporters.

The currency has been falling persistently since April this year and touched a record low of over Rs 50 to a dollar before recovering to the current Rs 48-49 levels.

A Sakthivel, president of Federation of Indian Export Organisations said “the decline in overall export growth require concerted efforts on the part of exporters as well as the government.”

“Subdued domestic demand conditions (and) slowdown in exports are likely to have a strong bearing on India's economic growth,”, a said report from analytics firm Dun and Bradstreet.

Though oil prices have slid by about 60 per cent from the peak six months ago, import bill for the current year will expand the trade deficit hit by exports.

Budgeted fiscal deficit was estimated at 2.5 per cent of the GDP in 2008/09. Now it could be twice that much as tax revenues are down. Subsidies on food, petroleum and fertilisers are adding to the government’s burden.

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