Statsguru: Omicron's impact on India's booming exports to be watched

India’s exports hit an all-time high in December 2021. The record figure of $37.3 billion is more than 10 times the monthly figure at the turn of the millennium (chart 1).

The record export figure, however, comes with record levels of imports. Imports were around 50 per cent higher in December 2021 than they were two years ago (chart 2) before Covid-19 made its presence felt. This is higher than 37.6 per cent export growth over the same time period. Consequently, the trade deficit is also hovering at its peak.

This has an adverse effect on the current account balance. There is a surplus or deficit depending on the net inflow of trade receipts and remittances. India managed a rare surplus in 2020-21 (chart 3). This was largely because of a contraction in imports after the outbreak of Covid-19, and the fact that there were surplus savings in the economy when investments were stuck. A wider current account deficit can leave a country more vulnerable to capital outflows during times of economic crisis.

The government has pointed to the need for strong export growth for strengthening the economy. Growth rates and overall contribution to exports have varied by segment (chart 4). Imports also show a pandemic impact.

Some large segments like engineering and electronic goods are barely above 2019 levels (chart 5). Gold and jewellery imports rose fast in the calendar year 2021. Services exports, meanwhile, have also been rising (chart 6), and India’s services trade surplus is moving north.  

Elevated commodity prices into the recovery cycle have been a key factor driving the high value of imports this year and are likely to remain so in the near term. How the Omicron variant affects this picture will be closely watched.  
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Note: Growth is compared to two years ago to show gains over pre-pandemic period. A similar metric has been applied to previous years as well for comparison: Source: Ministry of Commerce and Industry, Press Information Bureau (PIB)