Non-oil exports see resurgence in July indicating normalisation of economy

NEW DELHI: India’s foreign trade data released for the month of July shows interesting trends. While the trade balance went back to its usual deficit status after an extremely rare surplus in June, the resurgence of non-oil exports is one such. According to analysts, this is the key positive from July’s trade data release, indicating “a normalisation of the economy”.

“At (-)4 per cent, non-oil exports are on the way to growth. Non-oil import growth over June 2020 improved too, but contracted 27 per cent in July. Most of India’s major exports – gems and jewellery, petroleum products, textiles and apparel – are experiencing deep (20-55 per cent) contractions. Engineering, pharma and chemicals have emerged as the top exports,” said Anand Rathi Financial Services in a note.

In fact, oil product exports, among India’s most lucrative goods, fared quite poorly and was a major factor in the trade deficit. “Oil trade (was the) key reason for the deficit. Both oil imports & exports contracted in July. The extent moderated for oil imports — (-)55 per cent in June 2020 to (-)32 per cent in July — while that for oil exports intensified — (-) 32 per cent to (-) 49 per cent. The oil account deficit widened by
$1.8 billion,” the note said.

Instead, India’s exports are being driven by erstwhile small segments. Trade activity was robust in engineering goods, pharma, agri and iron ore, noted brokerage Emkay Securities, adding that a “significant rise in demand for iron, steel and iron ore from China aided growth”. It also noted that since April, the
recovery has been better in exports than imports.

According to data from the commerce and industries ministry, merchandise exports have improved from posting a 60.28 per cent contraction in April 2020 to contracting just 10.21 per cent in July.

Merchandise imports,however, have gone from a contraction of 58.65 per cent in April to declining 28.4 per cent in July.