As a result, the trade deficit was pegged at $13.82 billion in November, slightly lower than the 35-month high of $14 billion in the previous month. This may pressure current account deficit (CAD), which includes balance in services as well. The CAD stood at 1.2 per cent of GDP in the second quarter, lower than 2.4 per cent in Q1.
Non-oil, non-gold imports, taken as an indicator of industrial health, increased by 22.6 per cent at $27.21 billion in November. Growth was significantly high compared to 4.9 per cent in October, as well as also against almost 20 per cent in August and September each.
This meant industrial recovery may be round the corner. The index of industrial production (IIP) growth slowed to 2.2 per cent in October from 4.14 per cent in September.
However, the recovery may not be across the board as import of project goods declined 48.5 per cent in November.
Aditi Nayar of ICRA said while the high growth in exports in November came as a relief following the contraction in the previous month, it partly reflects higher commodity prices as well as a favourable base effect.
Among the major contributors, export of petroleum products rose 47.6 per cent, those of chemicals by 47.9 per cent and engineering 43.7 per cent.
Gems and jewellery exports rose 32.6 per cent despite gold imports declining by almost 29 per cent.
However, exports of fruits and vegetables, ready-made garments of all textiles, jute manufacturing including floor covering and carpet declined. Exporters said this should be analysed to address the pain points, especially as these sectors are highly employment intrinsic.
President of exporters’ body FIEO Ganesh Kumar Gupta attributed the growth in exports to a significant recovery in global demand.
"The positive growth in exports in November has been witnessed by China, South Korea, Taiwan, Singapore, reflecting recovery in global demand, though India has emerged as a top performer," he said.
Earlier this month, the government had announced a Rs 8,450-crore annual increase in incentives to the labour-intensive and employment-oriented exports in the mid-term review of the foreign trade policy. This financial year (FY18), it will be an additional incentive of Rs 2,816 crore.
This will benefit leather, handicraft, carpets, sports goods, agriculture, marine, electronic components, and project exports in merchandise, and legal, accounting, architecture, and education in services.
The government should also gradually extend these benefits to other sectors of exports since they are also facing numerous challenges in exports, the FIEO president said.
Gupta exuded confidence that the problems in GST refund would also be mitigated in the days to come to ease the liquidity issues for exporters. He highlighted embedded taxes on exports, GST on sea and air freight for exports, seamless timely refund among the issues that the government should focus on, while managing high volatility in exchange rate.