Mar-22 boost takes total trade for FY22 beyond $1 trillion

18 Apr 2022 , 12:28 PM

The month of Mar-22 was special in many ways. The exports for Mar-22 surged much faster than the imports resulting in the merchandise trade deficit narrowing to $18.52 billion. The trade deficit has now stayed at a median of $20 billion in the last 6 months.

First a look at the full year FY22 data, which was a year of several trade records.

Data Source: DGFT

FY22 — a year of incredible trade records

Among other things, the fiscal year FY22 will go down as a year of several records. Here are some recent records scaled in terms of overall trade.

a) For the month of Mar-22, the overall trade (imports plus exports) touched $102.96 billion, crossing the $100 billion mark for the first time ever in history.

b) For FY22, merchandise exports at $419.65 billion and the total service exports at $249.24 billion were records. Overall exports for FY22 stood at $668.89 billion.

c) The overall merchandise trade for FY22 stood at $1,031.54 billion, crossing the $1 trillion mark for the first time. The overall trade in goods and services for FY22 stood at a record $1.43 trillion, putting India in the global big trade league.

What cannot be ignored is that the merchandise trade deficit for FY22 stood at $192.24 billion. Also, with merchandise imports touching $611.89 billion, the forex reserves cover just about 11 months of merchandise imports, against 15 months cover last year. Let us now turn back our focus to the Mar-22 trade numbers.

Mar-22 exports surged on yoy basis and sequentially

Exports at $42.22 billion in Mar-22 were up 19.76% yoy and 96.48% higher compared to the Mar-20 export data. Even the sequential growth in exports stood at an impressive 22.13%. What is truly commendable is that this sequential growth was achieved amidst strong headwinds like resurgence of COVID cases in China, debilitating Ukraine war, rampant commodity inflation, central bank hawkishness and supply chain bottlenecks.

There were several star export performers in Mar-22. Exports of Petroleum Products (+115.42%), Leather products (+29.99%), Electronic Goods (+29.82%), Cereals (+26.32%), Textile products (+22.05%), Organic & Inorganic chemicals (+22.03%), Cotton Yarn & Handlooms (+21.53%), Plastic & Linoleum (+18.23%), Coffee (+17.75%) and Engineering Goods (+16.98%) were among the key growth drivers of exports in Mar-22.

However, there were some export laggards too, like Iron ore (-52.86%), Oil Meals (-47.91%), Mica, Coal, Ores (-40.20%), Oil Seeds (-18.68%), Spices (-13.31%) and Rice (-8.35%). Non-petroleum and non-jewellery exports in Mar-22 stood at $30.67 billion compared to $26.75 billion in Feb-21 and $22.48 billion in Jan-21. Cumulative value of exports for Apr-Mar were up 33.92% yoy at $419.65 bn.

Crude oil poses a question mark over imports

Merchandise imports for Mar-22 stood at $60.74 billion, up 24.21% yoy. Imports were up 9.54% sequentially. Crude oil imports at $18.79 billion in Mar-22 showed a sharp sequential spike of 22.97% on the back of rising crude prices. It was also up 82.97% yoy. The spike in oil imports was the outcome of a combination of Ukraine crisis, sanctions on Russia and supply chain disruptions. For now, the impact could be limited as Russian exports to EU are on.

The big import surge in Mar-22 came from Silver (+1,1697%), Fertilizers (+712%), Coal, Coke, Briquettes (165%), Pulses (84.83%), Petroleum Crude (82.97%), Medicines & Pharmacy (82.35%), Vegetable Oils (61.09%) and Pulp and paper (59.81%). Major items that showed lower imports on yoy basis for Mar-22 were Gold (-87.74%), Project Goods (-30.64%), Dyeing / Colouring material (-11.20%), Machine Tools (-8.53%) and Transport Equipment (-8.05%). Gold imports were sharply lower on yoy basis as well as on a sequential basis, from $4.80 billion to $1.04 billion. Cumulative value of imports for Apr-Mar period stood at $611.89 billion; up 55.13% on yoy basis and 28.90% over FY20 imports.

Combined deficit for FY22 widens sharply in Feb-22

For fiscal year FY22 (Apr-Mar), combined deficit of merchandise and services trade stood at $(-87.79) billion. The overall combined deficit widened by $6.55 billion from $(-81.24) billion to $(-87.79) billion on sequential basis.

Particulars	Exports FY22 ($ bn)	Imports FY22 ($ bn)	Surplus / Deficit ($ bn)
Merchandise trade	$419.65 bn	$611.89 bn	$(-192.24) bn
Services Trade #	$249.24 bn	$144.79 bn	$+104.45 bn
Overall Trade	$668.89 bn	$756.68 bn	$(-87.79) bn

Data Source: DGFT (# - DGFT estimates due to 1-month lag in RBI reporting)

India had closed FY21 with combined deficit of -$12.75 billion. For FY22 (Apr-Mar), combined deficit at -87.79 billion, is 6.89 times the FY21 figure. This surge in net overall deficit is likely to put pressure on the current account deficit for the March 2022 quarter.

Four risks to the India trade story

There were some broad trends visible in FY22. Exports got a big thrust, thanks to robust commodity prices. However, that also led to record crude oil imports. The year also saw a sharp spike in import of gold, fertilizers and edible oils. Looking ahead at FY23, there will be four challenges to the Indian trade story.

• Brent Crude may have corrected from $139/bbl to below $100/bbl, but the situation is still volatile. EU and China are not renewing fresh oil contracts with Russia and it remains to be seen if there is a sudden supply shortfall in the oil market by June.
• With the resurgence of COVID cases, China has locked down Shanghai. That could mean old problems surfacing like a shortage of chemicals and API inputs for pharma companies, non-availability of containers, slowdown in China demand etc.
• Oil is one side of the story but the war in Ukraine has caused a sharp spike in all industrial and even food related commodities. With the US consumer inflation at 8.5% and showing no signs of relenting, prices are going to be a major concern.
• Finally, the hawkishness of the Fed has already resulted in negative slope to the yield curve. If that is backed up by a slowdown in growth, then impact on trade can be quite harsh. Central bank policy remains a major risk for trade.

For now, the Ministry of Commerce can indulge in patting its back for crossing $400 billion in exports and $1 trillion in total trade for the first time in FY22. The onus is now going to be on the government to set the ball rolling to boost trade despite the bottlenecks!