The disappointment for India from a macro perspective was that total trade, measured as the sum of imports and exports, remains below its Mar-21 peak of $82.83 billion. In the last 3 months after Mar-21, when COVID 2.0 was at its worst, the total trade saw a fall of 10-15% on an average. Why is total trade significant? The total trade value is what determines the trade related job creation in the MSME sector, which is not only the biggest employer but also the biggest contributor to Indian exports.
Data Source: DGFT
On sequential basis, exports were flat but imports saw an 8.6% spike. This can be partially attributed to a sharp spike in the import value of oil due to crude remaining above the $75/bbl mark. However, the traction on exports is what is yet to pick up in a substantive way. YOY growth may be misleading, but the good news is visible when you compare with Jun-19. Imports are flat over 2019 but exports are sharply higher by 30% over Jun-19.
Jun-21 exports sharply up yoy, but flat on sequential basis
If you compare Jun-21 data with Jun-20, the export growth numbers are surely flattering due to the base impact. Here are some key export boosters.
Exports at $32.50 billion in Jun-21 were up 48.34% yoy. This growth can be considered to be optical as Jun-20 was a peak COVID month and hence export performance was constrained. There were several star export performers in Jun-21. Exports of Cereals (+235.93%), petroleum products (+115.37%), man-made yarn (+81.72%), Gems & Jewellery (+80.53%), Meat, dairy, poultry (+61.81%), Handicrafts (+55.10%), Plastics & Linoleum (+53.80%), Engineering Goods (+52.90%), Electronic Goods (+45.20%), and Jute (+44.93%) were the big stars of Jun-21.
There were some export laggards like oil seeds (-32.75%), Cashew (-24.45%), Tea (-18.54%) and Spices (-11.31%). Non petroleum and non-jewellery exports in Jun-21 stood at $25.65 billion against $18.48 billion in Jun-20. Cumulative value of exports for Q1 was $95.39 bn.
Imports decisively higher in Jun-21 on sequential basis
Merchandise imports for Jun-21 stood at $41.87 billion, 98.31% higher yoy. Imports were also higher sequentially by 8.6%. Crude oil imports at $10.68 billion in Jun-21 were higher by 116.51% yoy. While global Brent prices are up sharply on a yoy basis, there has also been a spike in volumes of oil imported.
There were a number of commodities that showed lower imports on a yoy basis for Jun-21. The fall was (-91.38%) for Silver and (-12.49%) for project goods. Cumulative value of imports for Apr-Jun stood at $126.15 billion.
Overall deficit for FY22 widens sequentially in Jun-21
For FY22 (Apr-Jun), combined surplus of merchandise and services trade was $(-8.18) billion. The flat surplus on services and widening merchandise trade deficit widened overall deficit by $2.33 billion from $(-5.85) billion to a level of $(-8.18) billion.
|Particulars||Exports ($ bn)||Imports ($ bn)||Surplus / Deficit ($ bn)|
|Merchandise trade||$95.39 bn||$126.14 bn||$(-30.75) bn|
|Services Trade #||$52.75 bn||$30.18 bn||$+22.57 bn|
|Overall Trade||$148.14 bn||$156.32 bn||$(-8.18) bn|
India ended FY21 with a net overall deficit of about -$12.75 billion. However, Q1-FY22, India reported overall deficit of $(-8.18) billion. If this trend is extrapolated for coming months, overall deficit could widen and that is likely to negatively impact the current account position in FY22. India had reported a current account surplus in FY21, albeit small.
Exports are up despite COVID; that is the Big News
DGFT has done well to give monthly comparison of Jun-21 trade with Jun-20 and Jun-19. The Jun-19 is relevant as allows a quick analysis regarding COVID impact. Here are 3 things that we can infer.
• Merchandise exports are up 18% over 2019, hinting that exports benefited during the COVID crisis. Incentives for MSMEs, PLI and Made in India thrust helped the cause.
• Merchandise imports are lower over 2019 despite higher crude prices due to weak oil demand compared to pre-COVID levels. As a result, the trade deficit is down by nearly 40% in the Q1 FY22, compared to pre-COVID levels.
• The stability of services has ensured that the overall deficit for the first quarter is nearly 70% lower compared to FY20 first quarter.
If you add up these data points, it emerges that India is not really worse off post COVID. Actually, on the trade front, it is better off!