Story in numbers: Steep drop in industrial demand may spoil recovery

The headlines panicking over a dramatic record fall in India’s merchandise exports in March because of the Covid-19 pandemic hid an unpleasant truth regarding the country's industrial performance. Policymakers at the commerce department have remained concerned for the entire 2019-2020 over the steep fall in imports, matching India's flagging export fortunes. Lack of domestic consumer demand and cyclical ebbing of global commodity prices have repeatedly been cited by the government as reason.

But now, sources confirm the Piyush Goyal-led department is closely watching the steep drop in non-oil, non-gold imports, which are key for maintaining industrial growth. While crude oil and gems and jewellery make up the largest chunk of the import bill, non-oil, non-gold imports mostly constitute industrial raw materials, components and equipments, which are used by factories to churn out products for both local and foreign markets. Universally accepted as a key indicator of domestic industrial demand, such imports have fallen for the 17th straight month in March.

Officials feel the long-term effects of such consistent fall will now become evident in the economy. As less and less industrial inputs are procured by the country and manufacturers constantly pare down their operations and growth targets, the resultant exports may take longer to recover, economists suggest. Over the past five years, non-oil, non gold imports have been highly volatile, staying in the red for a much longer period.