Exports jump 60% in March to $34.5 bn; trade deficit widens to $14 bn

Trade deficit widens to $14 billion despite 54% jump in imports

India’s merchandise exports surged to $34.45 billion, up 60 per cent year-on-year (YoY) in March, on the back of a low base effect in the lockdown-hit corresponding month last year.

On a sequential basis, the growth in merchandise exports was 23 per cent, the data released by the ministry of commerce and industry on Thursday showed. In terms of value of exports, it has surpassed previous high of $32.55 in March 2019 — nearly a year before the outbreak of the pandemic, signaling recovery in demand.

Experts said the jump in outward shipments is generally also a year-end phenomenon, with exporters trying to meet their annual targets.

However, imports grew sharply to $48.38 billion in March, up nearly 54 per cent YoY, led by a jump in inward shipments of gold that saw a sevenfold increase.

As a result, despite the sharp jump in exports, the trade deficit — the gap between imports and exports — for March jumped nearly 40 per cent to $13.93 billion, against a deficit of $9.98 billion during the year-ago period.

During the entire fiscal 2020-21, merchandise exports contracted 7.26 per cent YoY at $290.63 billion. Similarly, imports also shrank 18.02 per cent to $389.18 billion, mainly due to delay in revival in domestic manufacturing due to the pandemic. The trade deficit for the entire fiscal year narrowed to $98.56 billion, against $161.35 billion in the year-ago period.

“The sharp expansion in merchandise exports and imports in March reflects a combination of factors such as a muted base, rising commodity prices reflecting post-vaccine optimism, as well as a surge in volumes at the end of the year. Non-oil merchandise exports surged by $12 billion in March, relative to the year-ago month, more than two-thirds of which was on account of engineering goods, gems and jewelry, electronic goods, drugs and pharmaceuticals, organic and inorganic chemicals, and iron ore,” Aditi Nayar, chief economist at ICRA, said.

“March exports showed a double-digit growth of almost 60.50 per cent, showing not only impressive signs of further revival for the sector but for the overall economy as well...defying all the odds during these difficult times,” Federation of Indian Export Organisations President Sharad Kumar Saraf said.

Challenges ahead

Experts cautioned that the second wave of the pandemic has posed fresh challenges to the recovery process that has been underway in the past few months. “Given the surge in Covid-19 cases, we expect demand to get shifted from Q122 to the later part of the year, which may temporarily dampen imports. We expect India to record a current account deficit of $22-27 billion in FY22,” Nayar said.

“Many states have imposed restrictions which would certainly impact the flow of goods, including outbound shipments. But given the experience from last year, the government is in a better position to manage the situation,” Engineering and Export Promotion Council of India Chairman Mahesh Desai said.

Desai said approvals to multiple vaccines by various countries would add to the momentum in global trade, which plummeted to record low due to the pandemic.

“In the past 2-3 quarters, the recovery has been seen and it is projected to continue. We remain hopeful of a sustained recovery in coming quarters, he said.