India’s exports grew 6% in Sep after 6-month decline2 min read . Updated: 16 Oct 2020, 09:47 AM IST
Growth was due to high demand for engineering goods, pharma, petroleum products
India’s outbound shipments rose for the first time in seven months with merchandise exports registering a 6% growth in September—higher than the estimated 5.3% in provisional data released earlier. The growth was primarily driven by an increase in demand for engineering goods, petroleum products, pharmaceuticals and ready-made garments.
India’s exports rose to $27.6 billion, while imports contracted 19.6% to $30.3 billion, resulting in a trade deficit of $2.7 billion, according to data released by the commerce ministry. In the six months ended 30 September, exports fell 21.3% to $125.3 billion, while imports contracted 40.1% to $148.7 billion, creating a trade deficit of $23.4 billion.
India’s merchandise trade was weakening even before the covid-19 outbreak due to declining external demand. In 13 of the past 15 months, starting June 2019, the country’s exports were in the negative.
Since March 2020, both exports and imports started falling in high double digits, temporarily leading to a trade surplus in June for the first time in 18 years.
Data compiled by the World Trade Organization (WTO) showed global merchandise trade declined by 21% in the June quarter. According to the WTO, global volumes of merchandise trade is set to decline 9.2% in 2020, followed by a 7.2% rise in 2021. In April, the trade body had projected global merchandise trade to drop by 13-32% in 2020 because of the covid-19 crisis.
Aditi Nayar, principal economist, ICRA Ltd, said trade deficit fell in September compared to August due to a pickup in exports, as well as a sharp drop in gold imports. “The reasonably broad-based pickup in merchandise exports in September has come as a relief, and signals on its sustainability are anxiously awaited in light of the second wave of covid-19 infections being experienced in many trading partners," she added.
Gold imports dropped 53% in September to $601 million following a sharp rise in July and August, while imports of machinery and transport equipment fell sharply, hinting at weak domestic demand.
India’s economy contracted 23.9% in the June quarter, hit by the double whammy of a demand contraction and supply shock because of a countrywide lockdown, considered to be the strictest in the world to contain the spread of the novel coronavirus. The International Monetary Fund (IMF) projected India’s economy to contract 10.3% in FY21, while the Reserve Bank of India’s estimates put it at -9.5%.
Nayar said the decline in gold imports in September suggests that the pent-up demand related to the lockdown has been met. “However, imports may rise in the next two months with the festive and marriage season coming up, as well as the potential of a rise in rural demand after the kharif harvest," she added.
Prahalathan Iyer, chief general manager, research and analysis, Exim Bank of India, said the recovery in the export sector in September could only be considered sustainable if there is also a pickup in imports of non-oil, non-gold items. “Imports of non-oil items continue to be in the negative trajectory, which is a concern. We need to wait and watch the trend for a couple of months to see whether the growth is sustainable in second half of FY21."