Slowdown in India’s foreign trade compounds economic woes

Tuesday, 5 June 2012 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Indian export data released on Friday confirmed a sharp slowdown in foreign trade, adding to the woes of Asia’s third-largest economy and piling more pressure on the weak coalition government to take steps to boost economic growth.

Indian exports inched up 3.23 percent to $24.5 billion in April from a year earlier after falling in March, a far cry from the more than 20 percent growth recorded in recent years. India has been hit by falling demand from its traditional export markets in the United States and Europe.

The export figures compounded an already gloomy economic picture - GDP data on Thursday showed the economy grew at its slowest pace in nine years in the first three months of 2012. The rupee has also tumbled to record lows this week.

There was fresh evidence of a slowdown in the manufacturing sector, which accounts for nearly 15 percent of the economy, on Friday as India’s top automaker Maruti Suzuki said its car sales in May fell 5.9 percent, dragged down by high fuel costs and an excise tax hike.

Prime Minister Manmohan Singh, who awoke to newspaper editorials accusing him of weak leadership and demanding that he take action to arrest the economic slide, was due to hold a meeting of his economic cabinet on Friday evening.

Officials downplayed the importance of the meeting, saying it was routine. But it caps a bad week for the government, which not only has had to contend with bad economic news but a national strike on Thursday against a steep petrol price hike.

The government was expected to partially roll back the increase as early as this weekend.

The only item on the cabinet meeting’s agenda was a proposal to remove restrictions on the export of skimmed milk powder, and one minister said that the economic situation was not discussed.

Faced with a barrage of dismal economic data in the past few months, the government’s chief strategy has been to blame the downturn on high global oil prices and the euro zone debt crisis, while insisting that this is a temporary blip and growth prospects are still good.

This has infuriated investors who say a string of policy u-turns by the government and its failure to take aggressive action to narrow its rising trade and budget deficits and encourage more foreign investment are also to blame.