India’s trade balance in July snaps June’s surplus; export continues to fall in double digit

Due to muted domestic demand and consequently low imports, the trade deficit in July 2020, was substantially lower than the previous year.

After India had a chance to see a trade surplus for the first time in 18 years in the month of June, July’s trade balance once again slipped into the negative territory. India recorded a trade deficit of $4.83 billion in July, according to the Ministry of Commerce & Industry. While imports to India plunged 28.4 per cent on-year to $28.47 billion in the month, exports fell 10.21 per cent to $23.64 billion. However, due to muted domestic demand and consequently low imports, the trade deficit in July 2020, was substantially lower than the previous year.

Oil imports in July 2020 was 31.97 per cent lower, primarily due to the low fuel demand and the fall of 33.11 per cent in the price of global Brent price. Also, the non-oil imports in the month fell 27.26 per cent, while the non-oil and non-gold imports plunged 29.15 per cent in July. On the other hand, major commodities that witnessed a fall in exports were petroleum products (-51.54 per cent); gems & jewellery (-49.61 per cent); and leather & leather products (-26.96 per cent)

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Both imports and exports are plunging since March amid worsening global demand, India-China tensions, and disruption of global trade due to the coronavirus pandemic.  “External demand is expected to remain anaemic under the weight of the global recession and contraction in global trade,” RBI said in its August bulletin. Shifting the terms of trade in favour of agriculture is the key to sustaining this dynamic change and generating positive supply responses in agriculture, it added.

After a 3 per cent on-year decline in global merchandise trade in January-March quarter, World Trade Organization (WTO), as per its June 2020 update, had estimated 18.5 per cent on-year fall in merchandise trade in April-June quarter, on account of full-scale pandemic induced supply chain disruptions, fall in demand, loss of employment, and shutdowns. Economic disruptions brought by COVID-19 have affected some sectors significantly more than others. As per UNCTAD estimates, textiles and apparel, office machinery, automotive sectors, energy and automotive products, chemicals, machinery, and precision instruments have seen a sharp decrease in global trade.