Data Source: DGFT
What triggered the export growth in Mar-21?
The sharp spurt in overall trade is interesting because it was driven by imports and equally robust exports. The government gave leeway in terms of export of Agri-products and that contributed to export growth. Pharma exports saw a solid boost in last few months. The Atma Nirbhar program has helped, although the full impact will be felt in the medium term. One factor that has helped Indian exports is the spurt in global demand for ores and minerals emanating from the turnaround in manufacturing demand. The big risk going ahead is whether COVID could once again post a risk to supply chains.
A spurt in exports is the big news in Mar-21
As we mentioned, a number of factors like boost to Agri exports, demand for ores and the boost to pharma exports conspired to significantly support merchandise exports. Here are the big export gainers and losers.
Exports at $34.45 billion in Mar-21 were up 60.3% yoy. However, this could be a tad misleading as Mar-20 was a bad month due to the pandemic peak and hence the base effect may overstate the story. There were several star export performers in Mar-21. Exports of cereals (+326.44%), Oil Meals (+230.40%), Iron Ore (+194.89%), Jute (+105.26%), Electronics Goods (+91.98%), Carpets (+89.84%), Gems & Jewellery (+78.93%), Engineering Goods (+71.30%), Rice (+66.77%), Spices (+60.42%), Cotton Yarn (+55.67%), Ceramic Products (+53.48%), Meat & Poultry (+52.79%) and Pharmaceuticals (+48.49%) stood out.
There were just 2 export laggards; Oil seeds (-6.45%) and Cashew (-1.99%). For the financial year FY21, merchandise exports were down -7.26% at $290.63 billion, largely due to the front-ending of the lockdown lag effect during the year.
Imports also surged sharply in Mar-21
Merchandise imports for Mar-21 stood at $48.38 billion, 53.74% higher yoy, largely due to the base effect. Imports were higher by nearly 20% on a sequential basis. Crude oil imports at $10.27 billion in March were higher by 2.23% yoy. Brent Crude prices are up by 98% on a yoy basis and that led to the import surge.
There were a number of commodities that showed lower imports on a yoy basis for Mar-21. The fall was (-89.66%) for Silver, (-32.71%) for transport equipment, (-32.58%) for project goods, (-13.89%) for pulses and (-5.61%) for fertilizers. For the fiscal year FY21, total imports stood at $389.18 billion, down -18.02% over previous fiscal year.
Overall trade balance slips deeper into negative territory
For fiscal 2020-21, the combined surplus of merchandise and services trade shrank by another $4.95 billion over Feb-21 to $(-12.75) billion. Clearly, the surplus on services has struggled to keep pace with merchandise deficit and hence overall gap has widened.
|Particulars||Exports ($ bn)||Imports ($ bn)||Surplus / Deficit ($ bn)|
|Merchandise trade||$290.63 bn||$389.18 bn||$(-98.56) bn|
|Services Trade #||$202.57 bn||$116.75 bn||$+85.81 bn|
|Overall Trade||$493.19 bn||$505.94 bn||$(-12.75) bn|
For Feb-21, merchandise trade deficit stood at $(-13.93) billion while services trade surplus was $8.98 billion resulting in an overall trade deficit of $(-4.95) billion deepening the cumulative deficit for FY21 to $12.75 billion. It was in surplus till Dec-20.
Indian trade is up against 4 challenges
In a tough year, Indian may have managed to come out unscathed in terms of global trade. However, there are four challenges from here on.
- COVID numbers have crossed 2 lakhs per day. While the lockdowns are still not as severe as last year, it may happen soon if not controlled. That is not good news for trade as supply chains get impacted.
- Indian export story is still too predicated on low-end exports of primary products like sugar, cereals, Agri-products, meat, ores etc. These are low margin and low value-addition products that are not conducive to scaling up.
- Atma Nirbhar Bharat needs to be fast-tracked. At its current pace, it may take just too long to be really meaningful for Indian trade. The program needs to deliver tangible results in the next 6-9 months otherwise the post-COVID opportunity would be lost.
- The INR has been dipping due to excess liquidity in Indian markets. That has weakened the rupee below 75/$. While this technically helps exports, for a country like India with chronic oil-driven trade deficits; that is hardly a great piece of news.