India’s trade deficit at 25-month high in Dec

17 January, 2021 12:00 AM printer

NEW DELHI: India’s merchandise trade had been weakening even before the pandemic hit the economy and external demand.

Since March 2020, both exports and imports started declining in high double digits, even temporarily leading to a trade surplus in June for the first time in 18 years, report agencies.

Imports expanded 7.56 per cent last month, the first time in 10 months, while exports grew 0.14 per cent—leaving a trade deficit of $15.44 billion, according to data released by the commerce ministry on Friday, report agencies.

India’s trade deficit widened to a 25-month high in December as growth in merchandise imports outpaced exports, signalling a pickup in domestic demand after the pandemic devastated Asia’s third-largest economy.

China’s exports, in contrast, rose 18.1 per cent in December, the fastest growth since February 2018, while imports grew 6.5 per cent, leading to a record trade surplus of $78.17 billion.

Major Indian exports that helped India’s outbound shipments turn the corner include gems and jewellery (6.75 per cent), drugs and pharmaceuticals (17.5 per cent), chemicals (10.8 per cent), engineering goods (0.3 per cent) and electronic goods (16.5 per cent). A sharp contraction in readymade garments (-15 per cent) and petroleum products (-35.4 per cent) kept overall exports growth minimal.

The rise in imports was led by gold (81.8 per cent), vegetable oils (43.5 per cent), chemicals (23.3 per cent), artificial resins (32.3 per cent), pearls (7.81 per cent), iron and steel (12.7 per cent), non-ferrous metal (28.1 per cent), machinery (0.57 per cent) and electronic goods (20.9 per cent).

Aditi Nayar, principal economist at ICRA Ltd, said she is hopeful exports will strengthen in the coming months as the Covid-19 vaccine rollout gathers pace in India’s major trading partners.

“As the economic activity has normalised, the merchandise trade deficit has enlarged by $20 billion to $34 billion in Q3 FY21 from $14 billion in Q2 FY21. Accordingly, we expect the size of the current account surplus to shrink to under $2 billion in Q3 FY21, and the re-emergence of a small deficit can’t be ruled out at this point,” she added.

India’s merchandise trade had been weakening even before the pandemic hit the economy and external demand.


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