Mumbai: Merchandise exports in dollar terms are expected to post single-digit negative growth for the rest of 2015-16 due to low commodity prices, a report said.
India Ratings and Research (Ind-Ra) said that aggregate 15.1 per cent YoY fall in Indian merchandise exports in US dollar (USD) terms over the 10 months ended September 2015 was mainly driven by the fall in global commodity prices and sharp weakening of the euro averaged 17.1 per cent lower YoY.
The agency said that the prices of most major commodities are close to their bottom. However, merchandise exports in USD are expected to post single-digit negative growth for the rest of FY16, given that commodity prices will continue to be lower on a year-on-year basis.
A marginal up tick in exports in USD is likely from Q1 of FY17 driven by the base effect. The volume demand for Indian exports may not have suffered significantly during the period.
In fact, export volumes in certain categories, such as automobiles, continued to increase by 7.7 per cent in half year ended September 2015 as compared to 14.9 per cent in 2014-15 and 7.3 per cent in 2012-13, the rating agency said.
Export of crude oil and its products, which constitutes18.3 per cent of 2014-15 merchandise exports, declined 45.4 per cent YoY in value over December 2014 to September 2015, inline with the fall in crude prices.
Similarly, agriculture exports declined 19.1 per cent YoY on account of a decline in the prices of agricultural commodities. The decline in these two categories alone accounted for around three-fourths of the overall decline in merchandise exports.
The sharp fall in the prices of other commodities, along with lower crude oil rates, has also depressed the prices of many intermediate and manufactured goods.
Consequently, the value of exported items has shrunk, it said. The slowdown in economic activity in countries in Asia and Africa, which account for more than half of India's merchandise exports, may be a bigger challenge to India's export growth than demand from the United States of America (13.7 per cent of merchandise exports) or Europe (18.1 percent).
Industrial activity and personal consumption in the USA and Europe grew at a low yet steady pace in Q1 of FY16.Demand conditions in the US and Europe are likely to continue to grow at a gradual pace and will therefore support export volumes from India in the near term.
However, export growth to Asian (49.6 per cent) and African (10.6 per cent) regions is likely to remain subdued as economic activity in these regions has moderated due to falling commodity prices, volatile exchange rates, and moderating domestic demand.
Thus, an uptick in overall export volumes is as unlikely as is a sharp downturn.
