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Trade deficit falls to $12.2 billion in June; exports down 4.56 per cent

NEW DELHI: India's exports registered a sharp contraction for a second month in a row in June, continuing to be a sore point for the economy and taking away somewhat the comfort offered by a drop in imports.

Exports fell 4.56% in June from a year earlier to $23.79 billion, against a 1.1% decline in the previous month to $24.92 billion. The government and the Reserve Bank of India's concerted efforts over the past few weeks to curb gold imports, however, brought some cheer with overall imports declining 0.37% to $36.03 billion. The country's total imports had stood at $44.65 billion in May.

A decline in imports helped narrow the country's trade deficit to a three-month low of $12.2 billion in June. The deficit had widened to a seven-month high of $20.1 billion in May.

The drop in imports in June was mainly due to a sharp fall in gold and silver imports, said Director General of Foreign Trade Anup Pujari.

The government and the Reserve Bank have taken a slew of measures over the past few weeks to dampen the demand for the yellow metal in the country, including raising the duty on gold imports to 8% from 6%, restricting gold jewellery sales to cash and banning loans on gold coins. These steps were initiated to check the widening current account deficit that touched a record high of 4.8% of GDP in 2012-13, increasing pressure on the rupee that has tested new lows recently.

Gold and silver imports fell to $2.45 billion in June from $8.39 billion in May.

Softening prices of commodities such as crude oil in international markets also helped keep the import bill in check. Oil imports in June grew 13.74% from a year ago to $12.76 billion. Non-oil imports declined 6.7% to $23.2 billion.

Exports in the first quarter of the current fiscal declined 1.41% year-on-year to $72.4 billion. In the previous fiscal, exports had fallen 1.86% to $300.6 billion. Experts say the government will find it difficult to meet the current year's export target of $330 billion if the global economy does not show signs of recovery soon.

"It is a dismal data. Despite the government's efforts, exports are not picking up as global demand is yet to see a pick up," said Madan Sabnavis, chief economist at ratings agency CARE Ratings. "It is well reflected in the manufacturing as well, which is going from bad to worse."

The current fiscal is expected to go down as one of the worst phases for the overall exports and more so for the engineering sector, said Aman Chadha, chairman of Engineering Exports Promotion Council, which has sought the government's support to reach out to newer markets as demand in the US and the EU has been disappointing.

"While it is disappointing, we should not undermine the global trend as many countries pursuing export-led growth are also exhibiting declining exports," said M Rafeeque Ahmed, president of Federation of Indian Export Organisations. China recorded a 3% contraction in June exports.

Ahmed, however, said RBI should declare export credit as a priority sector for lending to increase credit flow to exporters and to reduce the rate of credit. "The swap facility may be extended beyond June 2013 to at least till March 2015 and the corpus may be enhanced to $20billion," he said.

Government had announced a raft of incentives for exporters in the annual supplement of foreign trade policy on April 18 but these have failed to rev up exports. It extended sops like extension of zero duty EPCG scheme to all sectors, incremental export incentive scheme, expansion of the 2% interest subvention scheme to more sectors in engineering and textiles, and addition of markets and products under the focus market and focus product scheme.

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