Exports: Here's what has contributed to the surge

India exported goods worth $35.43 billion in July, the highest first time ever in a month. According to the data released by the Ministry of Commerce and Industry, the record export number was led by  recovery in key global markets and robust demand. In fact, this was the eighth straight month when India’s merchandise exports have risen. Outbound shipments have grown by nearly 50% over July 2020. As compared to pre-Covid levels, the growth was 35% from July 2019. On a sequential basis also these shipments grew at their fastest this fiscal year, witnessing an 9% jump.

However, imports during the month also rose by about 63% to USD 46.40 billion. The trade balance for July 2021 was estimated at USD (-) 10.97 billion as against USD(-) 4.83 billion in July 2020, which is a decline of 127.4%.

Reasons behind surge in exports

A recent report by State Bank of India (SBI) economists suggests that India’s merchandise exports have staged a good comeback from Covid-induced lows hit last year. Merchandise exports stood at $130.53 billion in April-July 2021 period as against $75.22 billion in same period last year. Exports were mainly led by engineering goods, petroleum products products, gems and jewellery, textile and garments, and organic and inorganic chemicals.

“The higher value of petroleum products accounted for more than one-third of the YoY rise in merchandise exports in July 2021. The merchandise trade deficit in July 2021 was almost entirely contributed by petroleum products and precious metals and stones, with the net deficit of the balance items limited to a muted $0.6 billion, shrinking from an average of $2.2 billion in the previous quarter,” said Aditi Nayar, Chief Economist at Icra.

Over the last 25 years, petroleum products have been the biggest contributor to India’s merchandise exports, with their share rising from 1.5 per cent in FY97 to around 21% in FY13 and FY14. However, their share reduced to 9% in FY21 due to fall in crude oil prices due to lockdowns.

Outlook 

Commenting on the data, A Sakthivel, President, Federation of Indian Export Organisations (FIEO), said the global demand during this period has also remained buoyant as the order booking positions of exporters have been impressive.

Experts believe that movements in international crude oil prices will play a major role in influencing India’s crude oil exports. Going forward, economists are also of the view that recently government announced production linked incentive schemes (PLI) will make exports competitive for sectors like pharmaceuticals drugs, telecom & networking products, textiles, etc.