India's exports may have shown a sharp rise of 46 per cent in the first two months of 2011-12 fiscal, but the Reserve Bank on Thursday struck a cautionary note on the outlook.
"Since (early) May, the global environment has changed for the worse . . ." RBI said in its mid-quarter credit policy review on Thursday.
The global economy weakened in the second quarter of 2011, as growth moderated in both advanced and emerging market economies under the impact of high oil and other commodity prices.
"Uncertainty about the resolution of the sovereign debt problem in the Euro area has increased. These developments increase downside risks to global growth prospects," the central bank said.
India's exports showed a robust growth of 56.9 per cent in May at $25.9 billion and 34.42 per cent in April at $23.84 billion.
However, Commerce Secretary Rahul Khullar has been cautioning about 'difficult summer' ahead.
His
concerns are shared by RBI Governor D Subbarao.
"From our monetary policy perspective, global commodity prices still remain the key external risk though some signs of moderation are becoming visible," he said.
The Federation of Indian Export Organisations, lobbying hard with the government for continuation of the tax-neutralisation Duty Entitlement Pass Book scheme, has also not been sanguine about the prospects.
FIEO president Ramu S Deora said with the RBI raising the benchmark rates, the banks are bound to raise the interest rates which will make Indian exports uncompetitive.
The credit cost may touch 11.5 per cent for exporters as against 7.1 per cent in July 2010 - a jump of over 60 per cent.
"How will we compete with countries with interest rate ranging between 1-5 per cent," asked Deora.
India's exports of merchant goods aggregated $246 billion in 2010-11, showing a growth of 37.5 per cent.
In the current fiscal, they are expected to cross $275 billion.
But the state of global economy will hold the key.