It looks like India just caught the Chinese flu.
India’s merchandise exports tumbled 14% in April, making this the fifth consecutive month exports have declined. Merchandise exports account for 16% of India’s roughly $2 trillion economy.
This is going to put a serious crimp in Indian Prime Minister Modi reaching his goal of 8% economic growth. Well, we’ll soon find out. The economic numbers for the quarter ended March 31 are expected on May 29. In the December quarter, India’s economy grew 7.5%, compared with 7.3% in China.
India is finding out that the Chinese model of economic growth only works when the world is buying. The sharp decline in global demand is a big reason why economic growth is slowing in China. Currently, China is trying to stimulate domestic consumption to counter the slowdown. However, the process itself has been slow. Meanwhile, India, which is trying to base its growth on exports, is finding this a difficult job when no one is buying.
This is especially hard for Modi, who came into power as the man to fix India’s economy. Over the next four years, he hopes to double goods and services exports to $900 billion. This would then boost the manufacturing sector, which is then expected to provide jobs for the millions of young people who helped him gain power last year. Modi is visiting China, India’s top trading partner, this week.
The actual pain is hidden a bit by the $10.99 billion narrowing of the trade deficit. It appears the decline in crude oil prices offset the drop exporters’ overseas sales. Falling oil prices sent the cost of oil imports plunging 42% from a year ago, the Indian Ministry of Commerce and Industry reported on Friday. However, this is hurting the economies of oil exporting and Latin American countries. So, the exporters expect things to get worse as those countries experience a drop in demand.
“There is a fall in order booking for coming months, particularly from buyers in the Middle East, Africa and Latin American countries,” said Ajay Sahai, a senior executive at the Federation of Indian Export Organizations, told Reuters. He warned that exporters could be forced to lay off workers if sales orders continued to decline over the next five months.
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