Trade recovery: Exports hit record $37.8 bn in Dec, imports surge too

The CAD, according to an ICRA estimate, could rise to 1.4% of GDP in FY22, against 0.9% in the pre-pandemic year (FY20). Of course, it will still be well within the government’s comfort zone.

Merchandise exports touched a monthly record of $37.8 billion in December, up almost 39% from a year earlier and 39.5% from the pre-pandemic (same month in FY20) level, according to the provisional estimate released by the commerce ministry on Friday.

Keeping with the recent trend, imports, too, jumped nearly 39% on year to $59.5 billion, driven by elevated global crude oil prices and massive purchases of coal and cooking oil. Consequently, trade deficit in December remained at an elevated level of $21.7 billion, down only marginally from a record $22.9 billion in the previous month.

Although high import signals improving domestic demand following a Covid-induced compression last fiscal, it will also pressure current account deficit (CAD). The CAD, according to an ICRA estimate, could rise to 1.4% of GDP in FY22, against 0.9% in the pre-pandemic year (FY20). Of course, it will still be well within the government’s comfort zone.

Given that export between April and December hit $301.4 billion, also a record for the first three quarters of any fiscal and up 50% from a year before, the country is all set to realise its lofty FY22 goods exports target of $400 billion despite potential short-term risks to the global supply-chain from the new Covid-19 strain. A spurt in demand for goods in the wake of an industrial resurgence in advanced economies and global commodity price rise have boosted exports this fiscal, after a Covid-induced slide in FY21.

Merchandise exports had remained below par in the past decade, having fluctuated between $250 billion and $330 billion a year since FY11; the highest export of $330 billion was achieved in FY19. So, a sustained surge in exports for a few years will be crucial to India recapturing its lost market share.

Core exports (excluding petroleum and gems and jewellery) in December stood at $28.9 billion, up 29.7% from a year before and 37.3% from the pre-Covid period. Similarly, such imports rose 34.3% on -year in December to $35.5 billion and 47.3% from the pre-pandemic level.

The official data showed petroleum products were the biggest driver of exports with a year-on-year surge of 152%. Huge rise was also reported in the exports of engineering goods (38%), electronics (34%), cotton yarn/fabrics/made-ups, handloom products etc. (46%) and plastic & linoleum (58%). Gems & jewellery, organic & inorganic chemicals, drugs & pharmaceuticals and garments, too, witnessed a decent rise.

As for imports, among the key commodity segments, purchases of coal jumped 73%, organic and inorganic chemicals 73%, petroleum 68% and vegetable oil 51%.

A Sakthivel, president of the exporters’ body FIEO, said exports from labour-intensive sectors have witnessed a significant rise this fiscal, “which is a good sign”. However, the sustained surge in imports is a matter of concern and needs to be analysed, he added.

Mahesh Desai, chairman of the engineering exporters’ body EEPC India, said: “While the order pipeline has been remarkably good, we could see some slowdown in case Omicron disrupts the global supply chain. In recent weeks we have seen some signs of volatility and uncertainty due to the ongoing pandemic wave across the world….” Desai, therefore, called for urgent government intervention to reduce soaring raw material prices as well as logistics cost.

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