Exports zoom 69% to $32.27 bn in May; trade deficit rises to $6.3 bn

Merchandise exports grew 69.35 per cent year-on-year in May to $32.27 billion on account of low-base effect as well as rising demand from external markets.

On a sequential basis, they grew 5.35 per cent and 8.1 per cent as compared to May 2019. The growth has been driven by demand for items such as petroleum goods, engineering goods and gems and jewellery.

India’s merchandise imports declined in May to $38.55 billion, as compared to April, owing to the state-wise lockdowns that hurt domestic consumption. However, it grew 73.64 per cent on year due to a weak base caused by last year’s nationwide lockdown and tepid consumer demand.

As a result, trade deficit hit an eight-month low and narrowed to $6.28 billion, as compared to $15.1 billion in April and $16.84 billion in May 2019.

“The widening state-level restrictions shrunk the imports of crude oil and gold, narrowing the merchandise trade deficit to an eight-month low in May 2021. After the huge inventory build-up in February-April 2021, the impact of the lockdowns on retail demand led to a sharp slowdown in gold imports,” Aditi Nayar, chief economist, ICRA, said.

While state-wise restrictions due to the second wave during April-May caused some disruptions, exports largely remained unaffected mainly due to rising external demand. “The steady exports during April-May 2021, despite the second wave and associated lockdowns, are heartening, suggesting that India may be well poised to benefit from recovering demand in the advanced economies,” Nayar said.

Given a rebound in global trade, Reserve Bank of India governor Shaktikanta Das earlier this month pitched for enhanced and targeted policy support for exports. Global demand conditions are expected to improve further, buoyed by fiscal stimulus packages and the fast progress of vaccination in advanced economies, Das had said.

Meanwhile, India’s overall exports — merchandise and services — are estimated to grow 56.94 per cent on year to $98.29 billion in May, latest estimates released by the commerce and industry ministry on Tuesday showed. Overall imports grew nearly 78 per cent on year to $104.14 billion. The data for the services sector is released by the RBI. Data for May is an estimation based on the previous month’s data.

Engineering and Export Promotion Council of India  Chairman Mahesh Desai said even as the growth in outbound shipments has been robust in last few months and the outlook remains positive for the current fiscal year, rising cost of key raw materials.

“Soaring prices of various metals is a big challenge for the engineering goods manufacturers, which were badly affected by the Covid outbreak and the subsequent lockdowns,” he said.

“The continuing impressive growth in May 2020 reiterate our assessment that order booking position of our exporters is not only extremely good but also the gradual opening up of major global markets and improvement of situation in the country is expected to push exports growth further,” Sharad Kumar Saraf, president, Federation of Indian Export Organisations (FIEO), said.