Rupee Recovers, Export Fall Slows

The Indian currency on Thursday hit its weakest level against the dollar since September 2013, as China further devalued the yuan. However, on Friday, the rupee snapped its seven-day losing streak and closed 10 paise higher at 65 on fresh selling of the greenback by banks and exporters on hopes of a resumption of foreign capital inflows into equity markets.

The dip in exports was mostly due to a fall in refined oil exports, which dropped sharply by 43.2% to $3 billion. However, most other sectors showed positive growth, except chemical exports, which contracted by 6.2% to $1.2 billion.

Exports of gems and jewellery grew 4.9% to $3 billion, drugs and pharmaceuticals rose by 10.9% to $1.5 billion, engineering goods by 0.8% to $5.8 billion and readymade garments by 6.6% to $1.5 billion.

Non-oil imports, which are considered to be an indicator of domestic demand, rose 3.8% to $26.5 billion in July while oil imports contracted by 34.9% to $9.5 billion during the same month.

Import of gold and silver jumped significantly by 62.2% and 113% to $3 billion and $278 million, respectively.

The contraction in merchandise exports and imports in the current fiscal is being echoed in the services sector as well.

Despite the benefit from lower commodity prices, the merchandise trade deficit has narrowed by a meagre $2.5 billion in April-July 2015 relative to the previous year, which too is partly offset by the dip in the services trade surplus in the first quarter. As a result, the current account deficit is likely to record a marginal decline in the first quarter from $7.8 billion in the first quarter of the previous year.