From the perspective of output and jobs, it is normally the total trade (aggregate of exports and imports) that really matters. The total trade has continued to remain above $80 billion for the second month in succession, but the share of imports is sequentially increasing in total trade. The higher imports can be attributed to a spike in oil and gold imports but a good chunk of imports are also accounted for by higher import of inputs for exports. That is more of an encouraging signal.
On sequential basis, exports were down -6.07% while the imports were up 1.49%. However, even in the GDP analysis for the Jun-21 quarter, trade played a much bigger role in overall GDP growth. If you compare with pre-COVID levels of August 2019, merchandise exports are up by 28.03% while merchandise imports are up by 18.15%.
Aug-21 exports up yoy on base effect, but lower sequentially
Exports at $33.28 billion in Jul-21 were up 45.76% yoy. This growth can be considered to be optical as Aug-20 was the lag effect of COVID-19 pandemic. However, sequential export contraction of -6.07% is a challenge as it disrupts the momentum. Let us look at the star export performers yoy.
There were several star export performers in Aug-21. Exports of Petroleum Products (+144.60%), Gems & Jewellery (+88.30%), Engineering Goods (+59.01%), Cotton Yarn (+55.84%), Marine Products (+50.70%), Coffee (+42.31%), Mica, Coal (+38.56%), Organic Chemicals (+35.94%), Electronic Goods (+31.67%) and Jute (+25.30%) were the big guns.
There were some export laggards like Iron Ore (-64.58%), Oil Meals (-45.75%), Meat & Dairy Products (-15.39%), Oil Seeds (-5.78%) and Tobacco products (-2.55%). Non petroleum and non-jewellery exports in Aug-21 stood at $25.19 billion against $19.10 billion in Aug-20. Cumulative value of exports for Apr-Aug period was $164.10 bn; up 67.33% yoy.
Imports surge in Aug-21 on higher crude imports
Merchandise imports for Aug-21 stood at $47.09 billion, up 51.72% yoy. Imports were 1.49% up sequentially. Crude oil imports at $11.65 billion in Aug-21 were higher by 80.64% yoy. Crude oil bill is lower by $1.24 billion on sequential basis, indicating that the recent fall in crude prices on demand concerns had muted oil imports.
There were a number of commodities that showed lower imports on a yoy basis for Aug-21. The fall was (-68.01%) for Project Gods, (-59.67%) for Silver, (-47.50%) for Transport Equipment and (-7.87%) for Newsprint. Cumulative value of imports for Apr-Aug stood at $219.63 billion.
Overall deficit for FY22 widens sharply in Aug-21
For FY22 (Apr-Aug), combined deficit of merchandise and services trade was $(-17.26) billion. The flat surplus on services and higher merchandise trade deficit, widened the overall deficit by $7.52 billion from $(-9.74) billion to $(-17.26) billion.
|Particulars||Exports FY22 ($ bn)||Imports FY22 ($ bn)||Surplus / Deficit ($ bn)|
|Merchandise trade||$164.10 bn||$219.63 bn||$(-55.53) bn|
|Services Trade #||$92.08 bn||$53.81 bn||$+38.27 bn|
|Overall Trade||$256.18 bn||$273.44 bn||$(-17.26) bn|
India ended FY21 with net overall deficit of -$12.75 billion. For FY22 (Apr-Aug), India reported overall deficit of $(-17.26) billion. If you statistically extrapolate this trend for coming months, the overall deficit could widen to thrice the FY21 levels. That is not great news for the current account deficit in FY22.
Exports and imports are driving post-COVID recovery
While the trend was visible in DGFT data for the last few months, the quarterly GDP report highlighted that GDP growth over the previous year was triggered by higher trade, which had grown substantially compared to pre-COVID levels.
- August merchandise exports are up 28.03% over Aug-19 exports while the merchandise exports for the Apr-Aug period are up 23.25% over same period in 2019. Exports appear to be one area where India recouped and even bettered pre-COVID levels by a margin.
- August merchandise imports are up 18.15% over Aug-19 imports while the merchandise imports for the Apr-Aug period are up 4.39% over same period in 2019. Imports, despite the spike in oil consumption, have just about returned to positive levels in 2021.
- Services exports continued to provide stability but the growth over 2019 pre-COVID levels was not as encouraging as merchandise goods.