UPDATE 2-India's exports pick up but "difficult year" ahead

Mon Jan 16, 2012 4:01pm IST

* Dec exports up 6.7 pct from year earlier-Trade Secretary

* Says India will be close to $300 bln export target in 11/12

* Weakening rupee will likely help (Adds quotes, details, background)

By Matthias Williams and Annie Banerji

NEW DELHI, Jan 16 (Reuters) - India's exports accelerated in December as demand for its vehicles, engineering goods and petroleum products remained robust, but global economic uncertainty will likely make 2012 a difficult year, Trade Secretary Rahul Khullar said on Monday.

Asia's third-largest economy will come close to meeting its target of about 20 percent export growth for the fiscal year ending March, helped by a sliding rupee that could make Indian products more competitive, Khullar added.

India should be happy to maintain growth at that rate in the next fiscal year, which starts in April, he said.

"It is not rosy," he told reporters. "I am not saying that exports from India will not grow, but in a better time, when things were more buoyant, they would grow faster.

"I told you that 2011 was going to be tough, I'm telling you that 2012 will be even tougher," he said.

Indian exporters enjoyed record growth last fiscal year, but have struggled in recent months in the face of sluggish growth in the United States and financial turbulence in the European Union, India's biggest trade partner.

December's exports rose an estimated 6.7 percent from a year earlier to $25 billion, compared with 3.9 percent annual growth in November. Imports were $37.8 billion, leaving a trade deficit of $12.8 billion, Khullar said.

IMPORTS STRONG

Imports have risen strongly this fiscal year to sate demand for crude oil -- nearly 80 percent of which is imported -- as well as machinery, electronic goods and gold.

As a result of robust imports, Khullar said he expected the trade deficit for fiscal 2011/12 to rise to about $155-160 billion, in line with forecasts he has made in recent months.

Exports are expected to be close to $300 billion.

Exports rose 25.8 percent to $217.6 billion between April-December, Khullar said.

A weak rupee, which fell about 16 percent in 2011, will likely help bolster demand for Indian exports in coming months, he said.

"Last quarter exports are nearly always 10-15 percent higher than all preceding quarters, and this time there will also be the effect of the nominal exchange rate depreciation," he said.

However, import growth may be dented in coming months as a weaker rupee makes purchases from overseas more expensive and weak business sentiment keeps a lid on demand, he said.

India's economy is expected to grow about 7 percent this fiscal year, Prime Minister Manmohan Singh said on Jan. 9.

That is well down from the Finance Ministry's initial forecast of about 9 percent as high inflation, high interest rates and a slowdown in investment take their toll. (Reporting by Matthias Williams and Annie Banerji; Writing by Arup Roychoudhury; Editing by Subhadip Sircar and Ted Kerr)

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