The country’s merchandise exports in May rose at a seven-month high rate of 12.40 per cent to $27.99 billion from $24.91 billion in the same month last year, driven mainly by a demand revival in developed countries for high-value engineering and refinery products. Imports in the month, meanwhile, declined 11.41 per cent to $39.23 billion from $44.28 billion in May 2013, largely on the back of a 72 per cent decline in inbound gold shipments, data released by Commerce Secretary Rajeev Kher showed on Wednesday.

Though the overall import data might not reveal much at the outset, a deeper analysis suggests there could be initial signs of a recovery in industrial activity and a demand revival in the domestic economy. While the total has fallen due to a contraction in gold imports, the non-oil, non-gold imports have, in fact, risen – the first time in 10 months, albeit at a low rate of 0.5 per cent – to $22.57 billion from $22.46 billion in the year-ago period. Imports of oil rose 2.5 per cent in the month to $14.46 billion from $14.12 billion, while inbound gold shipments fell 72 per cent to $2.19 billion from $7.7 billion.

“Non-oil imports, excluding gold, grew 0.5 per cent on a year-on-year basis, showing the first signs of a recovery in domestic demand,” analytical company CRISIL said in its analysis of the numbers.

India’s trade deficit narrowed 42.01 per cent to $11.23 billion in May from $19.37 billion in the same month last year, though it was slightly higher than $10.09 billion in April this financial year.

In the first two months of 2014-15, exports rose 8.9 per cent to $53.62 billion, against $49.26 billion in the year-ago period. Imports fell 13.16 per cent to $74.95 billion from $86.30 billion during this period. Trade deficit narrowed 42.45 per cent in the first two months. Since this augurs well for the already-softening current account deficit, Secretary Kher is pinning hopes on a duty cut on gold imports in the Budget, besides easing of gold import procedures by the Reserve Bank of India around the same time. “If duty cuts on gold are announced, it might be in the Budget. If RBI eases procedures on gold imports, it may be around that time,” he said.

Asked if the double-digit growth rate was a sign of export revival, Kher said: “It is an encouraging sign. It should sustain. We don’t have a history of such a rise in exports in May. I will call it a revival if the trend continues for another month.”

Federation of Indian Export Organisations (FIEO) President M Rafeeque Ahmed, however, said this seemed to be the beginning of an upward march, backed by a better global trade forecast for 2014 and 2015.
“Going by the current trend, the export could reach $360 billion in 2014-15,” he said. India’s exports had stood at $312.35 billion in 2013-14.

To a query on export targets for 2014-15, Kher said his department was working towards $1 billion worth of exports on a daily basis.

A World Bank report released on Wednesday morning, though, painted a somewhat grim picture of economic growth in India’s leading trade partners. For instance, the US economy was pegged to grow only 2.1 per cent in 2014, only slightly better than 1.9 per cent the previous year.

But YES Bank Chief Economist Shubhada Rao said the trend was expected to be positive going ahead, as growth in the developed world quickened and offered further room in favour of emerging markets.

“Harbinger of the momentum ahead, recent exports data from China have topped market expectations, rising seven per cent in May. Today’s data from India have offered yet another surprise, signalling the global trade cycle is strengthening,” she said.

Kher said exports were acquiring their natural level, but 1.11 per cent export contraction in May last year also magnified this year’s numbers.

A meagre rise in gems & jewellery exports could be gauged from the outbound shipments of other high-value products. Engineering goods rose 22 per cent to 6.1 billion in May on a year-on-year basis, refinery products rose 28.7 per cent to 5.9 billion, readymade garments 24.94 per cent to $1.49 billion, drugs & pharmaceuticals 9.9 per cent to $1.35 billion and cotton yarn & fabric 6.15 per cent to $0.8 billion. However, exports of electronic goods declined, Kher said but did not reveal figures.