The overall trade deficit is likely to widen as rising coronavirus cases and subsequent lockdowns in key export markets dent India’s merchandise exports, experts said.
The recently released provisional data showed that India’s merchandise exports dropped by 9.07 per cent in November to $23.43 billion from $25.77 billion in November 2019.
“The slippage in exports growth signifies the near term impact of fresh restrictions in trading partners. The average merchandise trade deficit is likely to reach substantially higher levels in H2FY21 as compared to Q2FY21,” said Aditi Nayar, Principal Economist, ICRA.
Among commodities and products, iron ore, rice and pharmaceuticals continued to display healthy uptick in YoY shipments, whereas leather, textiles and engineering goods continued to show contraction.
EEPC India Chairman Mahesh Desai said that exporters continue to battle the Covid-19 impact on global trade, pinning hopes on start of the vaccination and abating of the pandemic.
He said several critical export sectors, including engineering, are reeling under a host of issues, including disruptions in production, transportation and increasing country-specific restrictions.
Under these circumstances, Desai pointed out that some of the doable measures like easy refund of GST and ensuring availability of raw materials at reasonable prices could provide relief to the exporters.
According to the data, India’s merchandise imports declined by 13.33 per cent in November to $33.39 billion from $38.52 billion in the corresponding month of the previous year.
Segment wise, oil imports were down 43.36 per cent to $6.27 billion from $11.07 billion in November 2019.
“The primary factor in the export performance continues to be the sharp decline in petro product shipments, but non-petro exports have also declined by 3 per cent presumably due to the impact of a resurgence of the Covid-19 pandemic in Europe,” said Suman Chowdhury, Chief Analytical Officer, Acuite Ratings & Research.
“Imports are yet to reveal any consistent growth back to normalised levels with significantly lower oil prices, although an uptick in electronic goods and edible oil segments is clearly visible,” Chowdhury said.
In terms of deficit, the figures have continuously receded. India is expected to either have a trade surplus in FY21 or a much lesser deficit in comparison to the previous year.
“We continue to maintain our view that India is headed for a record current account surplus of $25-40 billion in FY21,” said Chowdhury.