Trade deficit falls in May to $6.3 bn as imports dip
India’s trade deficit narrowed to an eight-month low in May at $6.3 billion as rising external demand kept exports ticking and the pandemic caused imports to dip.
Merchandise exports remained above the $30 billion mark for the third month in a row at $32.2 billion, while merchandise imports fell steeply to its lowest in six months at $38.5 billion, according to preliminary trade data released by the commerce ministry.
Trade minister Piyush Goyal has set an ambitious target of $400 billion of exports for FY22 against $290 billion in FY21, identifying pharmaceuticals, engineering goods, auto components, fisheries and agricultural goods as the key focus areas.
Aditi Nayar, chief economist at ICRA Ltd, said the merchandise trade deficit shrank to an eight-month low as Covid-induced regional lockdowns curbed domestic demand for both gold and oil.
“Importantly, non-oil, nongold imports remained largely steady in May relative to the previous month. To an extent, rising global commodity prices would have masked a dip in domestic demand. Nevertheless, it appears that non-oil, non-gold imports have been less affected by the state curbs, as compared to the decline in oil and gold imports,” she said.
The top increases in exports in May, as compared to the same month a year ago, were in petroleum (200%), engineering goods (53%) and gems & jewellery (179%).
The major declines were in drugs and pharma (-5.4%), fruits and vegetables (-10.6%) and oil seeds (-7%).
In contrast, the top increases in imports were in petroleum products (164%), precious stones (490%) and electronic goods (48%), while the top declines were in silver (-95%), transport equipment (-15%) and iron and steel (-3%).
Sharad Kumar Saraf, president of the Federation of Indian Export Organisations (FEIO), said the continuing growth in exports shows order books keeping in step with the gradual opening up of global markets.
“Though the government has announced a slew of measures to support exports, the need of the hour is to soon notify the RoDTEP (Remission of Duties and Taxes on Exported Products) rates to remove uncertainty from the minds of the trade and industry, thereby helping in further forging new contracts with foreign buyers. The government must address some of the key issues, including priority status to exports sector; extension of Interest Equalization Scheme beyond June till at least March 31 2024; release of the necessary funds for MEIS (Merchandise Export Incentive Scheme) and clarity on SEIS (Service Exports from India Scheme) benefits; resolving risky exporters’ issues; and continuance of seamless refund of IGST,” he added.
The prospects of a quick recovery in world trade have improved as merchandise trade expanded more rapidly than expected in the second half of last year, the World Trade Organisation (WTO) said last month.