Merchandise exports hit $33.8 billion in February, up almost 22.4% from a year earlier and 21.9% from the pre-pandemic (same month in FY20) level, according to the preliminary estimate released by the commerce ministry on Wednesday.
But a sharper rise in imports inflated trade deficit to $21.4 billion in February from a five-month low of $17.4 billion in the previous month. This will further pressure the current account at a time when the global crude oil prices have flared up in the wake of the Russia-Ukraine crisis.
Keeping with the recent trend, imports jumped nearly 35% on year to $55 billion, driven by elevated crude oil prices and massive purchases of coal and cooking oil.
Although gold imports dropped 11.5% from a year before in February, they nearly doubled sequentially, as Covid-related curbs eased in parts of the country.
“The duration of the Russia-Ukraine conflict, and its impact on commodity prices, especially crude oil, will determine the magnitude of the merchandise trade deficit in March 2022, even as year-end fulfilment of export orders may provide a buffer,” said ICRA chief economist Aditi Nayar.
She projected a mild moderation in the CAD in Q4FY2022 from the previous quarter, as the January-February trade deficit is tracking modestly below the October-November 2021 levels.
Given that the export between April and February hit $374.1 billion, up 46% from a year before, it will likely exceed the ambitious $400-billion target set by the government for FY22. This is despite potential short-term risks to the global supply-chain from the Russia-Ukraine conflict, some exporters said. A spurt in demand for goods in the wake of an industrial resurgence in advanced economies and global commodity price rise have boosted exports this fiscal, after a Covid-induced slide in FY21.
Importantly, merchandise exports had remained below par in the past decade, having fluctuated between $250 billion and $330 billion a year since FY11; the highest export of $330 billion was achieved in FY19. So, a sustained surge in exports for a few years will be crucial to India recapturing its lost market share.
The official data showed petroleum products were the biggest driver of exports with a year-on-year surge of 66%. Huge rise was also reported in the exports of electronics (34%) and engineering goods (31%).
As for imports, among the key commodity segments, purchases of coal jumped 117%, petroleum 67% and electronics 29%.
A Sakthivel, president of the exporters’ body FIEO, said while exports have witnessed tremendous growth this fiscal, the high imports in February “is a point of concern and should be analysed”.
Though the government has announced a slew of measures to support exports, the need of the hour is to soon announce extension of the interest equalisation scheme, among others, he added.
