Exports in negative terrain; inflation eases further

New Delhi, Jan 1 (PTI) Exports fell 9.9 per cent in
November, the second straight month of negative growth, as
demand vaporised in the US and Europe, but falling inflation
offered a compelling excuse for RBI to lower policy rates to
help stimulate consumer spending at home.

Exports dropped to USD 11.5 billion in November this
fiscal from USD 12.7 billion a year ago, while imports grew by
6.1 per cent to USD 21.5 billion. As a result, trade deficit
widened by over USD 10 billion.

Although a nearly Rs 35,000 crore worth stimulus package
was unveiled in December to help the industry from the global
economic downturn, the government in the Mid-Year Review
tabled in Parliament felt there is a strong case for RBI to
signal even lower interest rates as inflation is waning.

Inflation, measured by wholesale prices, fell to 6.38 per
cent for the week ended December 20 courtesy cheaper food and
fuel prices.

Making a case for easing monetary stance in view of
falling prices, ICICI Bank CEO and Managing Director K V
Kamath had said, "I think just now let us start by cutting
them (repo and reverse repo rates) by 1 (percentage point) or
so, and see what happens."

India's industrial production fell 0.4 per cent, slipping
into negative zone for the first time in 15 years, in October
as a result of a massive drop in demand resulting from the
global economic crisis.
With the US and several European countries slipping into
full-blown recession, Indian exporters have run into difficult
times, especially since October when exports contracted by
12.1 per cent, the first time in five years.

For the April-November period, the country's cumulative
exports grew by 19.4 per cent to USD 119.30 billion -- far
short of the USD 200 billion target set for FY'09.

However, exports expanded by 12 per cent in rupee terms
with the increase in exporters' realisations due to about 20
per cent decline in the value of the Indian currency against
dollar in the last few months.

Imports between April and November rose by 33 per cent to
USD 203.64 billion. The trade deficit for the period has
mounted to USD 84.34 billion from USD 53.19 billion.

"Manufacturing sectors like leather,textile, gems and
jewellery have been hit hard because of demand slump in the US
and Europe," export body FIEO President A Sakthivel said,
adding exports are likely to be hit for few more months.

The RBI is slated to take up the annual monetary policy
for quarterly review on January 27 and economists feel that
easing inflation offers a case for reducing policy rates.

The central bank has since October slashed CRR -- the
percentage of depositors' money that banks need to park with
it -- to 5.5 per cent from nine per cent and repo and reverse
repo -- the rate at which RBI lends and borrows short-term
funds from banks -- to 6.5 per cent from nine and five per
cent from six per cent, respectively.

The inflation data also captured the impact of reduction
in excise duty, announced on December 7, and the cascading
effect of cuts in prices of diesel and petrol by the
government in the first week of last month.

Auto sales suffered a severe beating in December as well,
with car market leader Maruti reporting a 33 per cent fall in
sales and two-wheeler leader Hero Honda 10.23 per cent.

Kamath said it would be in everybody's interest to bring
interest rates down.

Easing inflation and hopes of a rate cut helped stocks
bellwether Sensex climb 256 points on New Year's day today to
close at 9,903.46. PTI