Turnaround? Exports in May climb 67%, cross pre-pandemic level

Saraf also stressed that though the government has announced a slew of measures to support exports, the need of the hour is to soon notify the refund rates under the RoDTEP scheme to remove uncertainty, thereby helping exporters forge new contracts with foreigner buyers with ease.

Merchandise exports jumped over 67% year-on-year in May, aided by a conducive base. However, at $33.2 billion, the exports were almost 8% higher than even the May 2019 (pre-pandemic) level, showed the preliminary data released by the commerce ministry on Wednesday.

With this, exports have exceeded the pre-Covid (same months in 2019) level for three months in a row, suggesting the trade recovery appears to be taking roots despite the second Covid wave.

Of course, export growth was low even before the pandemic – outbound shipments rose about 9% in 2018-19 but again shrank by 5% in 2019-20. So only a sustained uptick over the next 2-3 years would help recapture the lost heights.

India had set a target to raise its exports (both goods and services) to $900 billion by 2019-20; however, total exports in 2019-20 were just $527 billion.

It’s noteworthy that exports had risen by just about 4% in May 2019 from a year before, thus providing a relatively low base for comparison. Still, given the unprecedented Covid crisis and localised lockdowns in some states, the export performance in May 2021 was very encouraging.

Imports, too, grew close to 69% to $38.5 billion in May, in sync with improving domestic demand. However, the imports still trailed by over 17% from the May 2019 level.

The sharp growth in trade in recent months, albeit supported by favourable base effects (exports were down by 36% and imports by almost 51% in May 2020), also suggests the supply side is able to respond better to a pick-up in demand from key markets. Of course, base effect will continue to aid trade growth in the coming months as well.

Thanks to enhanced exports, trade deficit narrowed sharply to $6.3 billion in May from $15.1 billion in the previous month.

Importantly, core exports (excluding petroleum and gems and jewellery) climbed up by 46% in May from a year before and nearly 12% from the May 2019 level. These imports rose 41% year-on-year but dropped by 4% from May 2019.

Analysts have already said sustenance of high exports (in absolute terms) in the coming months will signal a meaningful turn-around, as they cite the roller-coaster ride of exports in the wake of the pandemic last fiscal.

Commerce secretary Anup Wadhawan last month exuded confidence that the current wave of the Covid-19 pandemic was unlikely to alter the export trajectory in the coming months and that the country’s external trade would continue to perform well.

The commodities or groups that have recorded high growth in May over the same month in 2019 (pre-pandemic) included select cereals (376%), iron ore (155%), cotton yarn/fabrics/made-ups, handloom products etc. (25%), rice (20%), engineering goods (16%), drugs and pharmaceuticals (11%), marine products (9%), spices (9%), meat, dairy and poultry products (8%) and petroleum products (7%).

Key commodity groups of export showing negative growth in May over the corresponding month in 2019 were leather and leather products (-36%), tea (-29%), garments (-28%) and gems and jewellery (-13%).

Sharad Kumar Saraf, president of the exporters’ body FIEO, said the impressive export growth suggests order books remain “extremely good”. “…the gradual opening up of major global markets and improvement of situation in the country is expected to push exports growth further.

Saraf also stressed that though the government has announced a slew of measures to support exports, the need of the hour is to soon notify the refund rates under the RoDTEP scheme to remove uncertainty, thereby helping exporters forge new contracts with foreigner buyers with ease.

Despite logistics and manpower issues caused by the second pandemic wave, engineering goods exports remained robust in May, said EEPC India Chairman Mr Mahesh Desai. “We expect the order book of exporters to remain strong in the current financial year, given the demand trend from key markets such as US, China and Europe.”

Mohit Singla, chairman of the Trade Promotion Council of India said, “The fall in the import of pulses, newsprint, transport equipment and Iron & steel is a welcome trend towards self-reliant, as it shows that the government’s import substitution strategy have strongly worked for these sectors.”