Slight fall: Export recovery hits a bump in February

Having grown at the fastest pace in 22 months in January, merchandise exports slipped again in February, though marginally, continuing its roller-coaster ride in the aftermath of the Covid-19 pandemic.

Of course, growth in exports (year-on-year) may accelerate again in the coming months but that would be driven more by an ultra-favourable base effect than any meaningful recovery. Exports had crashed between March and May 2020, as the government was forced to impose a stringent lockdown to battle the pandemic.

Between June 2020 (when the lockdown curbs started to ease) and February, monthly exports have risen only three times from a year before.

Exports dropped by 0.3% year on year in February to $27.67 billion against a 6.2% rise in the previous month, showed the preliminary data released on Tuesday, indicating a bumpy road to recovery.

However, what comes as partial relief is that imports rose 7% on year in February to $40.55 billion against 2% in the previous months, suggesting a gradual return of domestic demand that was battered by the pandemic. This may also augur well for import-sensitive exports segments, including gems and jewellery.

Trade deficit narrowed to $12.88 billion in February from $14.54 billion in the previous month but it’s almost 27% higher from a year earlier.

Importantly, growth in core exports (excluding petroleum and gem and jewellery), which reflect the competitiveness of the economy, slowed to 5.8% in February from 13.4% in January. Growth in such imports eased only a tad to 7.4% in February from 7.5% in the previous month.

The data show the overall outbound shipments until January this fiscal remained 12.3% lower than a year earlier, while imports dropped at almost double the pace of 23.1%.

The products that witnessed impressive growth in exports in February included iron ore (168%), rice (30%) and drugs and pharmaceuticals (15%).

Imports of gold spiked by 124% on year in February to $2.93 billion, while those of electronics jumped 38% to $1.3 billion and chemicals by 38% to $559 million. Purchases of petroleum products from overseas, however, dropped 17% and those of coal declined by 28% and transport equipment by 23%.

Sharad Kumar Saraf, president of exporters’ body FIEO, said the marginal drop was driven by container shortages and limited supply disruptions in the last week of February due to increasing Covid-19 cases in certain states.

Saraf has also urged the government to soon notify the rates for the Remission of Duties and Taxes on Exported Products scheme, which will remove uncertainty from the minds of the trade and industry thereby forging new contracts with the foreigner buyers.

Meanwhile, as FE has reported, India’s merchandise exports to China, its second-largest market, seem to be losing steam after an impressive 33% y-o-y jump in the April-June period. Growth in shipments to the neighbour slowed down considerably to 20% in the September quarter and to just over 2% in the December quarter. However, India’s exports to its biggest market – the US – reversed a 39% slide in the three months through June to inch up by 3% in the September quarter and 5.5% in the December quarter, according to the official data. Of course, at $36 billion, exports to the US until December were still way above those to China ($15 billion).