The depressing trends in India's trade in this financial year continue to hurt its growth story. India's exports in August dropped by 6.05 per cent to $26.13 billion compared to the August 2018 mark, as per official data released on Friday. In the first five months of this fiscal, the overall exports are down 9 per cent to $15.33 billion. While the government has a reason to smile as yesterday's data showed a narrowed trade deficit in August to $13.45 billion, the drop in exports flies against Commerce and Industry Minister Piyush Goyal's statement barely 24 hours earlier, who said "India must bring back 19-20 per cent export growth to become a $5 trillion economy".
The growth in exports hit a 41-month low in June this year, as all major foreign exchange-earners like petroleum oil, gems and jewellery, and engineering goods recorded poor performance. The imports in June hit a 34-month low, recording a 9.06 per cent decline. The overall trade deficit went down by nearly 8 per cent to $15.28 billion in that month, which was a 3-month low. The outbound trade diminished by a worrisome 9.7 per cent in June, after registering a rise of 3.93 per cent in May.
In August, oil imports shrunk by 8.9 per cent to $10.88 billion, while non-oil imports were down by 15 per cent to $28.71 billion. The gems & jewellery and engineering goods exports have also seen negative growth. Cumulatively, the exports were down 1.53 per cent to $133.54 billion in the April-August period, while imports contracted by 5.68 per cent to $206.39 billion. Despite the upcoming festival season, gold imports plunged 62.49 per cent to $1.36 billion in August.
The gems & jewellery exports continued their downward spiral with a fall of 14 per cent in August (in rupee terms, down 12 per cent to Rs 20,242 crore) to $2.84 billion against $3.32 billion in the same month last year. Experts say the import duty hike on cut and polished diamond from 2.5 per cent to 7.5 per cent is a major reason behind the decline in exports.
Union Finance Minister Nirmala Sitharaman, in her Budget 2019 speech, had announced the hike to curb "round-tripping" of precious stones as witnessed in the Nirav Modi scam. With the rise in the duty, the gem & jewellery businesses have to pay a higher levy to bring back consignments, which have been rejected. Besides, the import duty on gold was hiked by 12.5 per cent from 10 per cent.
The gem & jewellery industry has demanded a reduction in the duty on gold and diamond and greater ease of doing business. Notably, cut and polished diamond exports also plunged by 25 per cent to $1.64 billion in August, while the gold jewellery exports climbed to $911 million. The overall trade picture in the April-August period remains dismal, and its hurting India's position as a global leader in the field. Cut and polished diamond exports are down by 19 per cent to $8.34 billion. Gold jewellery exports have dipped 4 per cent to $5.02 billion. Silver jewellery exports, however, are up by 83% to $437 million. The industry players say India can't hold its pole position in exports with high duty and taxation regime.