India's exports grew for the seventh straight month, rising by 35.1 per cent to USD 16.1 billion in May, but exporters may take a hit due to the sharp decline of the euro.
Commerce Secretary Rahul Khullar Friday said export numbers this fiscal look good because they were at the bottom (low base) last year. "Don't get carried away by these numbers. These are essentially being driven by the base
effect. In May 2008, exports were in the range of USD 18.5 billion. We are still below that number," Khullar said.
Battling recession in the Western markets, which account for the bulk of shipments from the country, exports had dropped to USD 12 billion in May 2009.
However, a sharp erosion in the euro because of the the still lingering debt crisis in the Eurozone economies has reduced the margins of exporters. Since December 2009, the euro has depreciated about 18 per cent against the rupee.
"Exchange rate depreciation of the euro is making European goods more competitive, and Indian goods more expensive. That's how depreciation works," Khullar said adding
if exporters' margins are small they cannot continue in the business.
Federation of Indian Export Organisations president A Sakthivel agreed with Khullar. "We must watch the developments in Europe cautiously as the Greek crisis may spread to other
countries," Sakthivel said.
Of USD 176.50 billion exports last fiscal, Europe accounted for 23 per cent.
For the April-May 2010-11 period, exports grew by 35.7 per cent to USD 33 billion against the the year-ago period.
Labour-intensive sectors like engineering, gems and jewellery, leather and man-made fibres have registered healthy growth rates, Khullar said.
Imports too surged by 19.8 per cent in May to USD 27.4 per cent, indicating the rapid pace of domestic economic activity and leading to a trade gap of USD 11.3 billion during the month under review.
Khullar said by the end of first quarter, exports is likely to be around USD 48 billion compared to USD 37.9 billion in the year-ago period.
Imports during the first two months of this fiscal grew by 29.1 per cent to USD 54.7 billion as against USD 38.9 billion in the same period last year.