India's exports clawing back up

India's exports rose for the first time in 14 months as recovery in the global economy boosted year-end holiday demand for the South Asian nation's products.

Overseas shipments rose 18.2 per cent to US$13.2 billion ($18.1 billion) in November from a year earlier after sliding an average 21 per cent a month since October 2008, according to a trade ministry statement.

Imports fell 2.6 per cent to US$22.8 billion in November, resulting in the trade deficit narrowing to US$9.6 billion from US$12.3 billion a year ago.

Record-low interest rates and more than US$2 trillion in government stimulus worldwide are reviving demand for clothes made by Gokaldas Exports and Hyundai cars.

South Korea's exports rose 33.7 per cent last month, the fastest pace in 17 months, as Asian economies from China to Singapore recover from the worst global recession since the 1930s.

"We are seeing a rebound in overseas sales mainly due to improved conditions in the US and Europe and festival demand ahead of Christmas," said N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy in New Delhi.

A return to export growth may boost production at companies in India and bolster the revival in Asia's third-biggest economy, which expanded 7.9 per cent in the three months to September 30 from a year earlier, the quickest pace in six quarters.

Some sectors have started showing signs of improvement.

Overseas sales of Indian gems and jewellery jumped 54.8 per cent to US$21.4 billion in November compared with US$13.8 billion in the same month a year ago, according to the Gem & Jewellery Export Promotion Council. Vehicle exports rose 25 per cent in November from a year earlier, the Society of Indian Automobile Manufacturers said.

November's increase in exports shouldn't be seen as the beginning of a positive trend, as shipments rose mainly due to a low base in the same month in 2008, Bhanumurthy said.

The difficulties for exporters and the Indian economy were not yet over, he said.

"The surge in inflation will result in increasing input costs for exporters, forcing them to raise prices and making it difficult for them to remain competitive in overseas markets."

India's benchmark wholesale-price index climbed 4.78 per cent in November from a year earlier, more than tripling from a 1.34 per cent gain in October, the Government said last month. A stronger rupee is also affecting exporters' earnings, according to the Federation of Indian Export Organisations.

The Indian currency strengthened 4.8 per cent last year to 46.5275 per US dollar on Saturday, according to data compiled by Bloomberg.

That was the third-best performance among Asian currencies after Indonesia's rupiah and the South Korean won.

The rupee gained as foreign funds raised their holdings of the nation's stocks to a record as the benchmark Sensitive Index rallied the most in 18 years. The Indian stock market is closed today because of a holiday.

The low-base effect on November's export growth meant "there is no need to go hoopla over these numbers", Trade Secretary Rahul Khullar said last month.

Shipments dropped almost 20 per cent in November 2008 from a year earlier.

Overseas sales declined 22.3 per cent to US$104.24 billion in the eight months to November from a year earlier. Imports fell 27.3 per cent to US$170.4 billion.

Non-oil imports dropped 5.9 per cent to $16.5 billion in November from a year ago, while oil imports rose 7.3 per cent to US$6.38 billion in the same month, the Government report showed.

The United States economy, India's second-biggest export market, expanded 2.2 per cent in the July-September quarter.

India is boosting its efforts to increase overseas sales by developing trade agreements with other countries.

The South Asian nation in August signed a free-trade accord with South Korea and the 10-member Association of Southeast Asian Nations as it attempts to reduce dependence on the US and Europe, which account for about 40 per cent of the nation's exports.

India in August also announced tax refunds for exporters to explore new markets in Africa and Latin America.

- BLOOMBERG