India attains trade surplus in June; but shipments still down

Even though both exports and imports were deep in the red due to the Covid-19 pandemic, official data showed that India emerged as a net exporter in June.

As per the data, the country recorded a trade surplus of $0.79 billion in June as against a deficit of $15.28 billion during the like period of 2019.

"This is the first time in the last decade that India is a net exporter," the Ministry of Commerce and Industry said in a statement.

Accordingly, the contraction in India's exports eased in June, as merchandise exports stood at $21.91 billion.

The contraction caused by Covid-19 pandemic narrowed down to (-) 12.41 per cent in June on a year-on-year basis from a (-) 36 per cent fall reported in May.

On a year on year (YoY) basis, the country's exports fell during the month under review to $21.91 billion from $25.01 billion reported for the corresponding period of the previous year.

In terms of sequential movement, the country's merchandise exports in May stood at $10.36 billion.

"Major commodity groups which have recorded positive growth during June 2020 vis-a-vis June 2019 are iron ore, oil seeds, rice, oil meal, spices, other cereals, organic and inorganic chemicals, cereals preparations and miscellaneous processed items, fruits and vegetables, drugs and pharmaceuticals, tobacco and coffee," the statement said.

According to the data, the non-petroleum and non-gems and jewellery exports in June were $18.48 billion, as compared to $19.15 billion in June 2019, exhibiting a negative growth of (-) 3.51 per cent.

However, the country's imports declined at a far higher rate than exports in June.

India's June imports declined by (-) 47.59 per cent to $21.11 billion from $40.29 billion reported for the corresponding month of 2019.

In May, imports had declined by 51.05 per cent to $22.20 billion from $45.35 billion reported for the corresponding month of 2019.

"Oil imports in June were $4.93 billion which was 55.29 per cent lower in dollar terms compared to $11.03 billion in June 2019," the statement said.

"Non-oil imports in June 2020 were estimated at $16.18 billion which was 44.69 per cent lower in dollar terms compared to $29.26 billion in June 2019," it added.

Besides, the non-oil and non-gold imports were $15.57 billion in June, recording a negative growth of (-) 41.37 per cent, as compared to non-oil and non-gold imports of $26.57 billion in June 2019.

Trade Promotion Council of India's Chairman Mohit Singla said: "The next month's exports performance will be even better as the industry is on the uphill and growth trajectory.

"As the forward and backward linkages of economic activity are gradually repairing, the supply shock is fading and thus making produce readily available to meet demand."

Similarly, EEPC India Chairman Mr Mahesh Desai: "As more and more markets open up, we expect further uptick in the exports in the coming months. However, the fiscal 2020-21 appears to be full of challenges and India would surely need an out-of-box strategy to face the global downturn, owing to unprecedented pandemic.

"The manufacturing needs to be supported in further opening up of operations both by the Centre and the states."

ICRA's Principal Economist Aditi Nayar said the underlying dynamics o f this trade surplus remain unpalatable, given the implications for the strength of domestic demand.

"The contraction in merchandise imports remained widespread in June, with few categories such as medicinal and pharmaceutical products, vegetable oils and pulses warding off a de-growth in that month, suggesting that domestic demand remained constrained even during the unlock phase," Nayar said.

"The imports of gold were subdued in Q1 FY2021, with demand restrained by both elevated prices as well as economic uncertainty amid the Covid-19 crisis. Demand for gold is unlikely to revive meaningfully before the festive and marriage season, in our view," Nayar added..