Monday, August 12, 2013

Rare bright spot for India as exports pick up, imports fall

NEW DELHI : Mon Aug 12, 2013(Reuters) - India\'s exports rose 11.64 percent in July from a year earlier while imports fell, a rare bright spot for its struggling economy, but with the trade deficit almost unchanged pressure on the current account deficit and rupee currency remained high.

At $25.83 billion, July exports were the highest since March, while imports fell 6.2 percent to $38.1 billion from a year ago, trade secretary S R Rao told reporters on Monday, citing provisional trade data.

However, despite the positive trends, the trade deficit of $12.27 billion in July was almost the same as in June.

Rao, India\'s top trade official, said uncertainty about where the rupee was headed meant companies had yet to see the full benefit of the weaker currency on foreign sales.

\"A stable exchange rate helps exports. Volatility does not permit exporters to get full value from the depreciation,\" Rao said.

In a research note, RBS said a sharp fall in gold imports to $2.9 billion in July from $4.5 billion a year ago would likely help the trade deficit going forward.

\"It does appear that the RBI\'s efforts to curtail gold purchases are finally starting to filter through,\" the note said.

The Reserve Bank of India and the government have taken a series of steps including increasing import duties to curb India\'s rampant demand for gold, which makes the country the world\'s biggest buyer.

Gold imports in May surged to a record $8.4 billion as people took advantage of falling prices.

The rupee has lost around 12 percent to the dollar since the start of May, caught up in an exodus of foreign investors from emerging markets after the U.S. Federal Reserve said it would begin scaling back stimulus measures.

To prop up the currency, which hit a record low of 61.80 to the dollar last week, the central bank last month engineered an increase in money-market interest rates in an effort to give investors in short-term rupee debt an incentive to keep their money in India.

The central bank unveiled further measures late last week to drain cash from the financial system by auctioning government cash management bills every week.

Expectations are high that Chidambaram will soon announce measures to draw in foreign inflows and restrict imports of non-essential.
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