India’s annual exports falling to lowest of five years

India's trade deficit narrowed for the third straight month in March to $5.07 billion, the lowest in five years, as imports shrank at a faster pace than exports. For March 2016, the merchandise exports and imports fell by 5.47 percent and 21.56 percent to $ 22.71 billion and $ 27.78 billion, respectively, as compared to the same period previous year.

For the whole of FY 2015-16, total exports were down 15.9 percent from a year ago to $261.1 billion. Imports fell 15.3 percent to $379.6 during the same period.

Prime reasons:

1. Modi administration's delay in signing free trade pacts, such as with the European Union, and   policies that seek to protect domestic industries have hurt India's export prospects.
2. Strength of the Indian rupee in real effective exchange rate terms had a negative impact on the   country's exports.

Positive effects :

The positive shift in the terms of trade (fall in imports is higher than fall in exports) has helped shield India from a slowing global economy and helped it outperform other major emerging economies, its economic growth outpacing China's.

Although exports for the year ending March were the weakest since 2010/11, down 15.85 percent from a year ago, the narrowing trade gap showed that India which is the world's third largest crude importer in the world has been a net beneficiary of the collapse in oil prices.

Negative effects :

With progress on the reforms needed to support a vibrant export sector still slow, the government’s ambition to nearly double export values by 2020/21 is looking increasingly unrealistic

Prediction for the FY 2016-17:

Prospects for export growth remain bleak as global trade forecast is expected to expand by just 2.8 percent (as per WTO) in 2016. Indian exports are predicted to perform poor in FY 2016-17 due to subdued global economic growth and still depressed commodity prices.

References:

1.      http://in.reuters.com/article/india-trade-idINKCN0XF1M5

2.      http://www.ibtimes.co.in/indias-march-trade-deficit-narrows-5-07-billion-675249