As the Indian economy limps back to normalcy following the gradual unlocking, international trade in several key sectors have displayed positive signs of turnaround. The monthly export trend indicates a steady growth after the unlocking of the economy began.
After plunging to $10.36 billion in April 2020, exports have increased steadily in subsequent months till July. If exports fell for the first time in the current fiscal in August, they have reportedly bounced back in September. Merchandise exports in the first week of September have increased by 13% to reach $ 6.1 billion.
In August 2020, exports fell by 12.7% as compared to the same month a year ago and by about 4% against the previous month. But these are not bad numbers for a segment that tumbled by 60% in April and is trying to claw back, especially at a time when other growth drivers like investment and consumption are falling unchecked. Even otherwise, India’s exports have had a difficult time in recent years. In 2019-20, the year against which current performance is being benchmarked, India’s exports fell by 5% from $330.08 billion in 2018-19 to reach $313.36 billion. Given such a scenario, an increase of 119% of exports in the last four months surely indicates the resilience of the sector - the poor base figure notwithstanding.
Major commodities which have recorded negative growth during August 2020 against the same month of 2019 are cashew, gems and jewellery, petroleum products, man-made yarn/fabs./made-ups, marine products, leather and leather products, engineering goods, chemicals and cotton yarn/fabrics/made-ups.
At the other end, the exports of a large number of commodities have increased too in August despite an overall decline. Major commodities which have recorded positive growth during August are other cereals, rice, iron ore, oil meals, oil seeds, cereal preparations and miscellaneous processed items, drugs and pharmaceuticals, tobacco, jute products, fruits and vegetables and meat, dairy and poultry products.
The decline in exports led to an increase in trade deficit ($6.77 billion) in August. Trade deficit was $4.8 billion in July. However, despite some increase in August, the cumulative trade deficit in the current year so far is far lower than that of the corresponding period of the last year. The cumulative trade deficit during April-August 2020 has narrowed down to $20.72 billion from $77.25 billion in the same period last year following sharper decline in imports. While exports fell by 26.6% during this period, imports declined 43.73%
China is now the second biggest export market
Surprisingly, despite deteriorating relations between India and China, the economy seems to be insulated from it as China remains a major trade partner for India. In fact, during April-July 2020, China has turned out to be India’s second biggest export destination relegating the UAE to the third spot. The US is the number one partner - accounting for 16.72% of India’s exports during this period.
%Share in India's exports
Source: Ministry of Commerce and Industry, GoI
China, which accounted for about 5.3% of India’s export in 2019-20 fiscal, has raised its share to 9.7% in April-July 2020. The UAE’s share by contrast has declined from 9.2% in the full year 2019-20 to 5.3% now.
India’s exports to China were estimated at $ 7.3 billion during April-July That is about 43% of what it exported to China in the full year 2019-20. Some of the commodities which witnessed sharp rise in export during April-July 2020 were ores, slag and ash, iron and steel, copper and article, plastic and plastic products, cereal and tea and coffee.
Amidst the coronavirus pandemic that is not showing any sign of slowing down, these are encouraging signs for the economy. Increase in export and decrease in import in several sectors indicate that manufacturing activity is picking up with the gradual unlocking.