India's November trade deficit narrows to nearly $10 bn2 min read . Updated: 02 Dec 2020, 10:05 PM IST
- Exports fell 9.1% while imports contracted 13.3%
- India’s merchandise trade has been weakening even before the covid-19 pandemic hit the economy and external demand
India’s outbound shipments contracted for the second consecutive month in November after recording positive growth just for a month in September, as the second wave of the coronavirus pandemic hit consumer demand in India’s largest markets in Europe.
Exports fell 9.1% while imports contracted 13.3%, resulting in a 10 month high trade deficit of $10 billion, according to preliminary data released by the commerce ministry.
Major export items that dragged down growth include petroleum products (-61%), engineering goods (-8.3%), chemicals (-8.1%), readymade garments (-1.2%) while pharmaceuticals (11.1%), gems & jewellery (4.1%), electronic goods (1%) registered positive growth. Items that drove imports and trade deficit include crude petroleum chemicals (36.1%), electronic goods (12.3%), fertilizers (29.3%) and gold (2.7%).
India’s merchandise trade has been weakening even before the covid-19 pandemic hit the economy and external demand. In 15 of the past 17 months starting June 2019, the country’s exports have been negative. However, since March of this year, both exports and imports started declining in high double digits, even 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. WTO now projects volume of world merchandise trade 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% to 32% in 2020 because of the pandemic.
The pace of contraction in the Indian economy slowed in September quarter to 7.5% from a historic high of 23.9% contraction in June quarter. While some research agencies have revised upward their GDP forecasts for India, S&P Global Ratings on Monday stuck to its earlier projection of 9% dip in GDP in FY21 holding it awaits more proof of sustained recovery in economic activities. “While there are now upside risks to growth due to a faster recovery in population mobility and household spending, the pandemic is not fully under control. We will wait for more signs that infections have stabilized or fallen, together with high-frequency activity data for the fiscal year third quarter, before changing our forecasts," it said on Monday. The OECD on Tuesday projected Indian economy to contract 9.9% in FY21, citing sluggish household consumption and largely unresponsive investment growth to easier monetary conditions.
Separately, trade minister Piyush Goyal on Wednesday chaired the Board of Trade meeting which discussed the strategy to be adopted in order to boost domestic manufacturing and exports under the upcoming Foreign Trade Policy for the five year period 2021-26. Board of Trade comprises of state trade ministers, secretaries of key ministries and export promotion councils among other officials.
Goyal called for moving beyond the traditional thinking on trade, which centres around government and government schemes, and move towards support to more free flow trade. “Trade should bank on India’s strengths of quality, cost competitiveness, economies of scale, and by leveraging our comparative advantages like labour. Going forward, we have every possibility to achieve the export target of a trillion dollars by 2025 and GDP target of $5 trillion," he added.