Today’s hot headlines circled around trade deficit numbers where the deficit expanded to US$15.2 billion from US$ 13.9 billion in March, 2021. On a month-on-month basis, exports also declined by 12% while imports went down by 6%. The numbers look grim due to the straining domestic demand amid the Covid-II wave.
Exports Rebound
On a year-on-year basis, the exports figure looked pretty good as a result of low base effect. For instance, India’s exports rose by 197% in April, 2021 on the back of jewellery and engineering goods. All segments of exports reported growth- non-oil exports rose 201%, jewellery saw 84x growth while engineering goods went up 235% in April 2021.
There’s an expectation of exports faring better in the months to come followed by improvement in growth prospects of major trade partners like the US and Europe. However, input cost pressures could dampen the firm’s demand for goods with buying of raw materials in the coming months if the costs continue to remain elevated. Since these higher costs can’t be passed on to the customers, it will likely lead up to larger build-up inventories.
Imports Regaining
India’s imports increased by 166% in April 2021 as compared to 54% in March 2021. Gold imports saw a great momentum to US$6 billion in April 2021. Oil imports also jumped by 132% in April 2021 from 2% in March 2021. Meanwhile, imports of electronic goods (increase of 214% from 77% in
Mar’21), transport equipment (171% v/s decline of 33% in Mar’21) and machinery, electrical & non electrical (114% v/s 60% in Mar’21) rose the
most.
With stable vaccination drive and gradual normalization in the economy, imports would experience pick-up or vice-versa. Imports could further see an improvement in future if the government opens up markets. For instance, the government allowed free imports of 3 pulses in order to keep retail prices from rising further.
Trade Secretary’s speech
On May 14, the Commerce Secretary Anup Wadhawan said to the media that India can achieve a $400 billion export target in FY22 as he sees no major impact on the export prospects. In the past as well, Wadhawan remained positive on exports. He said the government is hopeful of a positive growth in future and that the country is maintaining a trade balance. Post speech, analysts have also become hopeful to see a meaningful turnaround in the coming months.
