Exports rise 35% in May to cross $16 bn mark

Exports grew a strong 35.1% year-on-year in May showing that the debt crisis in the euro zone had not yet had a visible impact on India’s trade. 

Exports in May grew to $ 16.1 billion from $11.95 billion a year ago, data released on Thursday showed. Imports also surged 38.5% to $27.4 billion compared to the same period last fiscal, indicating a robust domestic economic activity. 

The trade deficit widened $11.29 billion from $7.8 billion a year ago because of the strong growth in imports. “While the trend in growth will continue for the next few months, exporters will face challenges on account of the adoption of the base rate regime, which is likely to increase the cost of export credit and uncertainty in the euro Zone,” said Federation of Indian Export Organisation president A Sakthivel said. 

Oil imports increased by 66.7% to $8.8 billion in May, while the non-oil imports rose by 32.3% to $18.6 billion. For the April-May period, exports grew by 35.7% to $33 billion over the comparative months last year. 

Imports during the first two months grew by 40.9% to $54.74 billion year-on-year. During April-May, trade deficit increased to $21.7 billion compared to $14.5 billion last year.

Pros & Cons of Rising Rupee

US Dollar has been falling ever since the news came out that the oil producing countries had a discussion to end dollar dominated oil trade. There may be many other reasons why US dollar has dropped. In other terms, the other currencies have been gaining. Indian Rupee has gained over 10% against US Dollar since last March.

Here we discuss the Pros & Cons of rising rupee:

CONS:

• Exporters will be hurt. The reason is they get less rupees for the dollar they earn through export. Suppose an exporter earns $100,000 in foreign exchange. At an exchange rate of Rs. 51/US$, this is worth of 51 lakhs while at the rate of 47, it is worth of 47 lakhs only.

At the same time, it makes their products more expensive in overseas market and erode their international competitiveness.

The strengthening of rupee ha an adverse impact on various companies/sectors, which derivses a substantial portion of their revenue from the USA markets. Software BPOs are for example.

Sectors to affect: Textiles, IT, BPO,

• NRIs will be badly affected.  They will have to pay more currencies of their respective country to get same amount that they sent last month.

• A cheaper imported item will affect our domestic industries. It is good on the other hand, as Indian companies will have to concentrate more on efficiency and quality.

• Affect FDI or FII: Every time a foreign bank or company to invest in India, they will need to buy rupees. The foreign investors (FIIs or FDIs) will have to pay more for rupees to invest in India. That means less return in dollar terms for them therefore, less attractive. At the same time it will turn positive if dollar gains against rupee. For example during this fall, FIIs have gained 10% return in dollar terms since Mar 09, as they will have to pay less amount of rupees to get their dollar back.

PROS

• Importer’s rejoice; exactly opposite to the exporters. A stronger rupee means their import bill will fall in rupee terms. Biggest beneficiaries in this case will be oil marketing companies.


• Your foreign trip will cost you less, as you will have to pay fewer rupees to buy dollars to spend abroad.


• Beneficial to students who are studying abroad.


• Appreciating rupee helps in easing the pressure, related to foreign debts servicing (interest payments on debt raised in foreign currency), both Indian govt. and companies.

A stronger currency is always good for a nation for long term perspective. Short term glitches can be maintained with proper planning.


How many of us know that when India got independence in 1947, 1 Rupee was equal to 1.2 US Dollar!!