India’s merchandise exports drop as COVID-19 affects global trade

The COVID-19 global outbreak heavily dented India’s merchandise exports in April, as they plunged by over 60 per cent on a year-on-year basis to $10.36 billion from $26.07 billion reported for the corresponding period of the previous year.

“The decline in exports has been mainly due to the ongoing global slowdown, which got aggravated due to the current COVID-19 crisis. The latter resulted in large-scale disruptions in supply chains and demand resulting in cancellation of orders,” the Ministry of Commerce and Industry said in a statement.

“Except for ‘Iron Ore’ and ‘Drugs & Pharmaceuticals’ which registered a growth of 17.53 per cent and 0.25 per cent respectively, all other commodity or commodity groups have registered negative growth in April 2020 vis-a-vis April 2019.

“Similarly, imports declined by 58.65 per cent to $17.12 billion in April from $41.40 billion reported for the corresponding month of 2019.

“Oil imports in April 2020 were $4.66 billion, which was 59.03 per cent lower in Dollar terms, compared to $11.38 billion in April 2019,” the statement said.

“Non-oil imports in April 2020 were estimated at $12.46 billion which was 58.50 per cent lower in Dollar terms, compared to $30.02 billion in April 2019.

“Besides, non-oil and non-gold imports were $12.46 billion in April 2020, recording a negative growth of (-) 52.18 per cent, as compared to non-oil and non-gold imports of $26.05 billion in April 2019.”

Consequently, India’s trade deficit narrowed to $6.76 billion on a year-on-year basis in April from $15.33 billion reported for the corresponding month of last year.

“Despite the graded relaxations in the current month, the levels of merchandise exports and imports are likely to remain subdued in May 2020 as well,” ICRA’s Principal Economist Aditi Nayar said.

“However, a pause in remittances may prevent a current account surplus in Q1 FY2021.”

According to EEPC India Chairman Ravi Sehgal, over 60 per cent drop in merchandise exports during April is a not surprising “given a near halt in the global trade”.

“While the trade, especially of essentials like food and medicine is partially opening across the international borders, it would be a long haul before normalcy returns in the wake of the world grappling with the Covid-19 pandemic.

“Exporting units, especially in the engineering sectors, are largely MSMEs and face an existential crisis. While the MSME package would provide liquidity infusion, the units need straightforward fiscal support like waiving of electricity charges, water bills, and wage support for survival,” he said.

India’s GDP for the financial year 2020-21 is likely to grow in the range of 0.9 per cent to 1.02 per cent, according to a report by Crediwatch.

“In case the lockdown gets extended till May end (which is a more likely scenario in some states), we will only be able to see any green shoots of recovery towards the end of Q3, the GDP will range from 0.9 per cent to 1.02 per cent,” it said.

Several states have extended the lockdown and Prime Minister Narendra Modi in his address to the nation on Tuesday hinted at a relaxed lockdown. The third phase of the nationwide lockdown ends on May 17, Sunday.

On the economic package being announced by the government, Meghna Suryakumar, CEO of Crediwatch said: “If the stimulus works it will be between 1 to 1.02 per cent, I believe 1 per cent GDP growth is what everybody is looking at.”

The coronavirus pandemic and the nationwide lockdown has brought the Indian economy to almost a halt and industry bodies and economists has anticipate huge job losses, shutting down of businesses in case adequate government support does not come in.

Narendra Modi on Tuesday announced an Rs20 lakh crore economic package and Finance Minister Nirmala Sitharaman has been laying out details of the package in tranches.

India’s foreign exchange reserves rose by $4.235 billion during the week ended May 8th, RBI data showed on Friday.

According to the RBI’s weekly statistical supplement, the overall forex reserves increased to $485.313 billion from $481.078 billion reported for the week ended May 1.

India’s forex reserves comprise foreign currency assets (FCAs), gold reserves, special drawing rights (SDRs) and India’s reserve position with the International Monetary Fund (IMF).

On a weekly basis, FCAs, the largest component of the forex reserves, edged higher by $4.233 billion to $447.548 billion. Similarly, the value of the country’s gold reserves increased but marginally. It rose by $13 million to $32.291 billion. However, the SDR value slipped by $3 million to $1.423 billion.

Indo-Asian News Service