The recovery in exports seen in September was short-lived as outbound shipments contracted by 5.12 per cent in October as the second wave of Covid-19 hit Europe and the US continued to reel from the pandemic's impact. Almost all high value items – petroleum products, gems and jewellery, engineering goods or electronic goods — contracted except for pharmaceuticals.
Exports had risen five per cent in September, raising hopes of a recovery in the second half of the fiscal. At $27.58 billion, exports in September had almost reached the pre-Covid level of $27.65 billion. However, it fell again to $24.89 billion in October.
Imports on the other hand continued to fall for the eighth consecutive month in October, declining by 11.53 per cent, even as the rate of decline reduced. The decline in imports has consistently moderated since April, when it had plunged by 58.65 per cent. Imports contracted by 19.6 per cent in September.
The trade deficit rose again to a nine-month high of $11.75 billion in October from $2.72 billion in the previous month.
Non-oil, non-gold imports fell by 4.9 per cent in October. However, the rate of fall reduced from 12.63 per cent in September. This shows that there has been some improvement in domestic demand. In fact, the index of industrial production (IIP) rose for the first time in seven months in September, even though it was only by 0.2 per cent.
Exports were down 19.02 per cent during the first eight months of the current financial year, while imports fell by 36.28 per cent. Trade deficit stood at $32.16 billion during the period, almost a third of $100.6 billion in the corresponding period of the previous financial year.
Exports of petroleum products declined by 52 per cent in October, while gems and jewellery were down by 21 per cent. Electronics goods declined by nine per cent and engineering goods by four per cent in the month.
“The renewed lockdowns in some advanced economies may suppress the level of non-oil exports in the ongoing month,” said Aditi Nayar, principal economist at ICRA.
Mahesh Desai, chairman of Engineering Export Promotion Council India, said Indian exports face a tough winter with the second wave of Covid hitting Europe and the US reeling under the pandemic.
Meanwhile, services exports declined 1.43 per cent in September against 9.88 per cent the previous month. Imports on the other hand declined 8.66 per cent against 20.06 per cent.
“The sharp narrowing in the year-on-year contraction in services exports and imports is encouraging, signalling a return to normalisation,” Nayar said.
Deficit in services trade stood at $7.15 billion in September against $6.84 billion in August.
“As economic recovery strengthens, we expect the current account surplus to decline substantially in Q3 of FY21, from the $20 billion recorded in Q1 and $12-14 billion expected for Q2,” Nayar said.