India's May exports up 67% YoY at $32.21 bn; trade deficit at 8-month low

Performance signals recovery in external demand as shipment values were nearly 8% higher than May 2019 figures

Demand for outbound shipments from India continued to be on the rise, with India’s merchandise exports estimated at $32.21 billion in May, up 67.39 per cent year-on-year, and 7.93 per cent as compared with May 2019.

Exports grew 5.15 per cent on a sequential basis. The year-on-year growth can be attributed to a weak base due to the disruption caused by a nationwide lockdown last year. However, compared with the pre-pandemic period and April 2021, the latest data released by the government is emblematic of recovery in external demand. The growth was driven by a rise in demand for engineering goods, petroleum products, gems and jewellery, pharmaceuticals and iron ore.

Preliminary data released by the commerce and industry ministry showed that Merchandise exports in the first two months of the fiscal year was $62.84 billion, up 12.44 per cent as compared to April-May 2019.

Exports were not immediately affected by the imposition of the lockdown across various states to contain the devastating resurgence of Covid-19 spread from April. Exporters said that the impact of lockdown in several states was limited, unlike last year when the nationwide lockdown was far more stringent.

India’s merchandise imports declined to a six-month low in May at $38.53 billion, as state-specific curbs amid the second wave of the pandemic hurt domestic consumption.

Imports grew 68.54 per cent on-year. On a sequential basis, imports were down 18.66 per cent, and fell 17.47 per cent as compared to May 2019.

According to Aditi Nayar, chief economist at ICRA, considerable moderation in merchandise imports in May as compared to April is on account of a drastic fall in gold imports, as well as a dip in oil imports, with state curbs hitting mobility.

Trade deficit hit an eight-month low and narrowed to $6.32 billion, as compared to $15.1 billion in April and $16.84 billion in May 2019. However, it grew 74.69 per cent on-year from $3.62 billion in May 2020 due to the disruption caused by the Covid-19 induced lockdown last year.

“A predominant 63 per cent of the decline in the trade deficit in May 2021 relative to April 2021 was on account of the collapse in gold imports, with the balance led by a narrower oil deficit, led both by higher exports and lower imports,” Aditi Nayar, chief economist at ICRA said, adding that collapse in gold imports can also be attributed to large inventory built up since the Union Budget for 2021-211 was presented.

Engineering and Export Promotion Council of India (EEPC) India Chairman Mahesh Desai said that despite logistics and manpower issues caused by the second wave of pandemic, shipments of engineering goods remained robust in the month of May.

“Like previous two months, exports of engineering goods saw a substantial year-on-year rise of 53.14% in May primarily on account of low-base due to strict lockdown in the same month last year. We expect the order book of exporters to remain strong in the current financial year given the demand trend from key markets such as US, China and Europe,” Desai said.

In May, non-petroleum and non-gems and jewellery exports was $23.97 billion, up 45.96 per cent on year. As compared to May 2019, the segment grew 11.51 per cent.

Federation of Indian Export Organisations (FIEO) President Sharad Kumar Saraf said that growth in labour-intensive sectors such as cereal preparations and miscellaneous processed item, gems and jewellery, engineering goods, marine products, among others, augurs well for the job scenario, which is most relevant in the current context.

“The continuing impressive growth in exports reiterate our assessment that the order booking position of our exporters is not only extremely good but also the gradual opening up of major global markets and improvement of the situation in the country  is expected  to push exports growth further,” Saraf said.