India's foreign trade May 2013 - The gloom continues

The foreign trade data (merchandise) was released today. It paints a gloomy picture of trade. The exports declined:

Exports during May, 2013 were valued at US $ 24505.66 million (Rs. 134807.62 crore) which was 1.11 per cent lower in Dollar terms (0.13 per cent lower in Rupee terms) than the level of US $ 24779.72 million (Rs. 134983.82 crore) during May, 2012. Cumulative value of exports for the period April-May 2013 -14 was US $ 48670.03  million (Rs. 266203.05 crore) as against US $ 48568.66 million (Rs. 258239.33 crore) registering a growth of 0.21 per cent in Dollar terms and growth of 3.08 per cent in Rupee terms over the same period last year.

The imports increased:

Imports during May, 2013 were valued at US $ 44649.26 million (Rs.245619.14 crore) representing a growth of 6.99 per cent in Dollar terms and 8.04 per cent in Rupee terms  over the level of imports valued at US $ 41733.45 million ( Rs. 227336.72 crore) in May, 2012. Cumulative value of imports for the period April-May, 2013-14 was US $ 86600.99 million (Rs. 473734.59 crore) as against US $ 79540.94 million (Rs. 423225.26 crore) registering a growth of 8.88 per cent in Dollar terms and growth of 11.93 per cent in Rupee terms over the same period last year.

The rupee has depreciated over last year. That explains the difference in terms of trade in dollar and rupee terms. The rupee slide is due to the high current account deficit and bad numbers churned out by major macro indicators. The trade deficit increased by more than 7 billion USD over last year period of April-May.  7 additional Billion dollars of deficit in two months is significant.

Indian policy makers are absolutely clueless about how to turn this around. The foreign trade policy can hardly do anything about it. As pointed out by your blogger in this earlier post, the situation is turning bleaker, with the foreign capital inflows being stymied now. I wonder how India will afford such a huge current account deficit in times to come. Rupee is poised for a major slide. The blogger cannot rule out a level of Rs 62/dollar by year end if things continue this way. There is hardly much that RBI can do in terms of intervening in the rupee market. The forex market has grown to a magnitude of more than 70 Billion USD per day, seriously limiting the influence that our central bank can have on rupee valuation. There are merits of having a devalued rupee, but the inelastic imports (oil and gold) might lead to an imported inflation in India. The debate is out in the papers. The blogger will leave it at that.

It's time to reboot reforms. Period.