The strengthening rupee appears to have had an impact on the country’s booming foreign trade. The latest official data on foreign trade shows that export growth slowed down to 18.07 per cent in May as compared to 23.06 per cent in April.
The Commerce Ministry said on Monday that merchandise exports totalled $11.86 billion in May, up from $9.35 billion in the same month of 2006, when exports had recorded a year-on-year rise of 20.6 per cent. That means that yearly growth in May was slower than growth in the same month last year, probably on account of the rupee, which began getting stronger in March this year.
Exporters have pointed out that a strong rupee is hurting the profitability of exporters and have eroded their competitiveness, resulting in orders being lost to competitors such as China, Thailand, Pakistan, Sri Lanka, Bangladesh, Vietnam and Indonesia.
Imports rose by 26.36 per cent to $18.07 billion in May, leaving a trade deficit of $6.21 billion for the month. Oil imports dropped to 2.99 per cent to $4.74 billion in May this fiscal from $4.88 billion in the same month of the previous year.
Non-oil imports went up by a robust 41.58 per cent to $13.33 billion against $9.42 billion in May 2006-07.
Last month, the government had announced a series of measures that include a quicker refund of certain taxes, a reduction in interest rate on exporters’ credit and an interest on foreign currency earnings garnered by exporters to cushion the adverse impact of appreciating rupee.
The government has also decided to set up a committee to assess job losses due to the rupee appreciation and reduced premiums on insurance cover to make exports more competitive.