Defying Covid blues, merchandise exports jumped 48% in July from a year before and 34% from the pre-pandemic level (July 2019), thanks to a robust demand from key markets and a rise in global commodity prices. At $46.4 billion, imports, too, rose 59% year-on-year in July and 15% from the same month in 2019, showed the preliminary data released by the commerce ministry on Monday.
While the impressive growth in July was aided by a favourable base effect, what lends credence to a trade recovery is the fact that goods exports have now crossed the pre-Covid (same months in 2019) level for five straight months.
Exports in July stood at $35.2 billion, against $23.8 billion a year earlier and $26.2 billion in the same month of 2019. With this, outbound shipments of $130.6 billion in the first four months of this fiscal recorded a rise of 74% y-o-y and 22% from the same period in 2019.
Still, thanks to elevated imports in July, trade deficit hit a three-month high of $11.2 billion.
Enthused by the rise, the government believes the high export target of $400 billion for FY22 will be met. Already, almost 33% of the annual target has been met in the first four month. Last fiscal, the country could ship out goods worth only $291 billion due to the Covid outbreak.
Importantly, core exports (excluding petroleum and gems and jewellery) climbed up by 27% in July from a year before and 32% from the June 2019 level. Core imports rose 35% y-o-y but declined marginally from the level witnessed in July 2019. This suggests trade growth in July was impressive, even excluding the impact of costlier oil.
FE has reported that the government now intends to set am ambitious export target of over $1 trillion by FY26 under the new foreign trade policy, to be effective from October 1. However, this would mean exports would have to rise at a compounded annual growth rate of 15% until FY26, against just 5% in the five years through FY20 (pre-pandemic).
Of course, export growth had remained subdued even before the pandemic – outbound shipments rose about 9% in 2018-19 but again shrank by 5% in 2019-20. So, only a sustained uptick over the next few years would help India recapture the lost heights.
Data showed that exports of petroleum products surged by 216% on year in July, while those of gem and jewellery jumped by 130% and engineering goods aby 42%.
Similarly, imports of pearls, precious and semi-precious stones climbed by 179%, followed by gold (136%) and petroleum (97%).
Icra chief economist Aditi Nayar said: “With a robust services trade surplus in June 2021, in addition to the state lockdown-compressed merchandise trade deficit, we expect a small current account surplus of $2-3 billion for the first quarter. Overall, we expect the current account deficit to be limited to $20-25 billion or 0.7% of GDP in FY22.”
A Sakthivel, president of the exporters’ body FIEO, said while the government has announced a slew of measures to support exports, “the need of the hour is to soon notify the RoDTEP rates to remove uncertainty from the minds of the trade and industry”.
Also, the government should address some of the key issues, such as extending priority-sector status to exports, release of the necessary funds for clearing MEIS dues and clarity on SEIS benefits. Resolving issues invlving the so-called risky exporters, augmenting the flow of empty containers and establishing a regulatory authority to oversee freight hike are crucial as well, Sakthivel said.