NEW DELHI :India’s merchandise exports contracted in February after two successive months of growth amid increasing concerns of a second wave of coronavirus infections, and delay in implementing a tax reimbursement scheme for exporters.
Preliminary data released by the Union commerce ministry on Tuesday showed that exports fell 0.25%, while imports picked up to grow at 7%, leading to a trade deficit of $12.9 billion during the month.
In April-February, merchandise exports contracted 12.32% while merchandise imports fell 23.1% resulting in a $151.4 billion trade deficit in the first 11 months of FY21.
In February, exports of petroleum products (-27%), gems and jewellery (-11%) and engineering goods (-2.6%) fell while shipments of pharma products rose by around 15%. Among major import items, petroleum (-16.6%) and transport equipment (-23%) fell, while import of gold (124%), electronic goods (38%) and chemicals (37.6%) shot up significantly.
India’s merchandise trade had been weakening even before the pandemic hit the economy and external demand. Exports fell in 16 of the past 20 months starting June 2019. Since March 2020, 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.
Federation of Indian Export Organisation president Sharad Kumar Saraf said the export decline in February was mainly on account of container shortages across the country and limited supply disruptions in the last week of the month due to increasing covid cases in certain states. “We continue to see signs of further revival not only in the order booking positions, but also in the demand from across the globe, paving the way for much better days and months for the sector. However, rising exports from China has led to the shortage of containers in the region as most of the empty containers are available only for exports from China as the shipping lines and container companies are being paid hefty premiums for bringing empty containers back to China," he added.
Saraf also urged the government to notify the Remission of Duties and Taxes on Export Product rates to address the uncertainty and help exporters forge new contracts with foreigner buyers. Though the RodTEP scheme will be implemented from 1 January, the rates have not yet been notified.
Aditi Nayar, principal economist, ICRA Ltd, said following the FY22 budget announcement of reducing import duty on gold, gold imports surged to the highest level in February since November 2014. “With gold imports remaining elevated for the last three months, we now expect the total value of shipments in FY21 to modestly exceed the level of $28.2 billion seen in FY20. We expect the merchandise trade deficit to print at $12.5-13.5 billion in March 2021, resulting in a current account deficit of under $5 billion in that quarter," she added.
The Indian economy recovered in the December quarter to expand at 0.4% after two successive quarters of historic contraction induced by the coronavirus pandemic, signalling that Asia’s third-largest economy may be on the path of a slow but sustained recovery. For FY21, however, the government’s statistics office estimates a deeper contraction of 8% than the earlier estimate of 7.7% contraction.
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