India's exports growth appears to be inversely related to the rise in Covid-19 cases in the export destinations, Crisil Research said in a statement today.

"Put in another way, exports are flowing back to economies that have checked the affliction," the statement said.

"That explains why exports to certain economies are looking up while overall exports per se are still declining, though at a slower pace."

The country's exports as well as imports have consistently declined since March 2020, ever since the pandemic disrupted business activity and global trade along with domestic demand.

"But the pace of decline is slowing, especially for exports. From a trough of (-) 60.2 per cent on-year in April it turned to (-) 10.2 per cent in July," the statement said.

"The reason is a sharp rise in exports to economies which have been able to control the pandemic. Latest country-wise data for June shows high growth in India's exports to China (78 per cent on-year) and other east Asian economies (constituting 16 per cent of our export basket). These include Malaysia (76 per cent), Vietnam (43 per cent) and Singapore (37 per cent). Most of these economies had flattened the Covid-19 caseload curve in this period."

In contrast, the note pointed out that exports declined to western economies such as the United States, Brazil and the United Kingdom, which saw a much higher caseload and were struggling to control it.

"Export prospects for this fiscal will pivot on the trajectory of the pandemic across countries. It will rise to countries that have controlled their caseload and restarted activity," the statement said.

As per the note, China is a case in point. The country entered and controlled the pandemic much earlier than other economies. Its cases peaked in February, post which economic activities resumed, particularly in manufacturing and construction.

"China's gross domestic product GDP grew 3.2 per cent on-year in the April-June quarter, in contrast to sharp declines reported in other major economies. This raised its import demand from the rest of the world, including India," the statement said.

"It's no coincidence then that India's exports to China have grown in double digits since May. Industrial commodities such as iron and steel, ores, and organic chemicals were the key drivers of this rise (data available till May)."

However, India's imports from China continue to decline, owing to weaker domestic demand and import restrictions.

"This sharp rise in exports relative to imports has significantly brought down trade deficit with China as well," the statement added..