The sharp fall in exports a matter of concern, says SBI Research
The trade numbers released indicate export declining by 3.7% and imports registering a de-growth at17.1%. As a result the overall trade deficit narrowed to $8.1 billion. According to SBI Research the point of concern is the decline in exports even at a dollar value of over Rs 60. Adding to the export woes is the fact that EU’s Generalized Scheme of Preferences (GSP) designed to support developing countries export to the European Union (EU) will now be not applicable to India, points out SBI Research. Mineral products, textiles, motor vehicles, bicycles and chemicals originating in India will no more invite preferential treatment.
According to SBI Research, there is also the concern on gold imports. Although gold imports from official channels has declined, the vast inelastic demand for gold further fuelled by high domestic prices premium, has now been made good by unofficial channels.
Finally, SBI Research believes that though the fair value of the rupee is below 60 to the US dollar, RBI will continue to bolster reserves, and the rupee will continue to trade in the current range with gains unlikely beyond 60.
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