Exports grew for the first time in seven months at 5.99 per cent in Setpember, boosted by items such as drugs and pharmaceuticals and, to some extent, engineering goods.
The growth number was a tad higher than 5.27 per cent estimated at the beginning of the month by the government. The growth assumes importance, since it has been contracting not only for six months prior to September, but in all the previous months of the current calendar year, barring February.
Outbound shipments stood at $27.58 billion in September versus $26.02 billion in the same month a year ago, showed trade data released by the commerce department on Thursday. The export number in September was only slightly lower than pre-covid level of $27.65 billion in February.
As many as 22 out of some 30 major products saw growth in exports.
“The reasonably broad-based pick-up in merchandise exports in September 2020 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,” Aditi Nayar, principal economist at Icra said.
FIEO president Sharad Kumar Saraf said as business activities and economic sentiments are inching towards normalcy globally, exporters have started receiving plenty of enquiries and orders from across the globe, helping many sectors to further show improved performance. This is is likely to get even better in the next few months.
High-value items have also started reversing the declining trend, with engineering goods exports rising by 5.44 per cent, and electronic goods by a miniscule 0.07 per cent.
Engineering body EEPC India Chairman Mahesh Desai said, “The challenge in external trade would continue given the present state of global health emergency.”
On the other hand, imports declined 19.6 per cent to $30.31 billion during the month, against $37.69 billion in the year ago period. Declining prices of crude and allied products played an important role in this, as they fell 35.88 per cent. Transport equipment was lower by 47.08 per cent, and electrical and non-electrical machinery by 36.76 per cent.
The trade deficit declined by 76.66 per cent to $2.72 billion, from $11.67 billion a year ago.
Within imports, non-oil and non-gold imports were down 12.63 per cent at $23.88 billion in the month against $27.33 billion in September, 2019. This category of imports denotes domestic demand. As such, domestic demand may still take some time to recover even as the pace of contraction in non-oil, non-gold imports came down from nearly $30 billion in the previous two months each.
“The recovery in the export sector in September could only be considered sustainable if there is also pick up in imports of non-oil, non-gold items,” said Prhalathan Iyer of Exim Bank.
Exports had declined 21.31 per cent at $125.25 billion in the first six months of the current financial year
Trade Promotion Council of India chairman Mohit Singhla said food and farm exports were up almost 45 per cent in the second quarter of FY21 and the demand for these products overseas will further increase. Other sectors that will see a rise in demand globally are steel, mining, pharma, home sanitation and home furnishing.
Imports, on the other hand, fell 40.06 per cent to $148.69 billion. Trade deficit stood at $23.44 billion, which was 73.63 per cent lower than $88.92 billion a year ago.
This will continue to provide comfort to current account balance, though the surplus may decline in Q2 versus Q1 of FY’21.
“The current account surplus is likely to ease from $20 billion in Q1 of the current financial year to $13-14 billion in Q2 FY2021, while remaining substantial, led by the pent-up demand fuelled revival in gold imports in July-August 2020,” Nayar of Icra said.