Dive in exports to stay on new European Union norm: Report

MUMBAI: Decline in exports, as witnessed in February for first time in eight months, is expected to continue for more time as the European Union has withdrawn preferential treatment to merchandise shipments from India, a State Bank Research report said today.

"Decline in exports may continue," the report said, hours after the release of official data, which showed that exports from India contracted by 3.7 per cent in February this year to US $ 25.7 billion. However, trade deficit fell to US $ 8.1 billion from US $ 9.9 billion in January due to a sharp fall in imports.

The SBI said benefits under the EU's generalised scheme of preferences, designed to support exports from developing countries, will not be applicable to India now, hampering shipments from the country. As a result of this, the exports of mineral products, textiles, motor vehicles, bicycles and chemicals are expected to suffer as they will no longer enjoy any preferential treatment, it said.

The SBI report said India will end this fiscal with a current account deficit at US $ 34 billion, or 1.8 per cent of GDP, but sounded concerned on the gold import front. "Although gold imports from official channels have declined, the vast inelastic demand for gold further fuelled by high domestic prices, has now been made good by unofficial channels," it said.