Trade deficit widens to $12.9 billion in Feb
NEW DELHI: India’s merchandise exports contracted in February after two successive months of positive growth amid rising concerns over a potential second wave of coronavirus pandemic and delay in implementing a tax reimbursement scheme for exporters.
Preliminary data released by the commerce ministry on Tuesday showed exports fell 0.25% while imports picked up pace to grow at 7% leading to a trade deficit of $12.9 billion.
During April-February period, merchandise exports contracted 12.32% while merchandise imports fell 23.1% resulting in $151.4 billion of trade deficit.
In February, exports of petroleum products (-27%), gems and jewellery (-11%) and engineering goods (-2.6%) fell while shipments of pharma products rose around 15%. Among major import items, petroleum (-16.6), transport equipment (-23%) fell while imports of gold (124%), electronic goods (38%), chemicals (37.6%) shot up significantly.
India’s merchandise trade had been weakening even before the pandemic hit the economy and external demand. Exports were negative in 16 of the past 20 months starting June 2019. Since March 2020, both exports and imports started declining in high double digits, even temporarily leading to a trade surplus in June for the first time in 18 years.
Aditi Nayar, principal economist at ICRA Ltd said the reduction of import duty on gold in the FY22 budget announcement led gold imports to surge to the highest level in February since November 2014. “With gold imports remaining elevated for the last three months, we now expect that the total value of shipments in FY21 may modestly exceed the level of $28.2 billion seen in FY20. We expect the merchandise trade deficit to print at $12.5-13.5 billion in March 2021, resulting in a current account deficit of under $5 billion in that quarter,” she added.
Indian economy recovered in the December quarter to expand at 0.4% after two successive quarters of historic contraction induced by the coronavirus pandemic, signalling that Asia’s third largest economy may be on a path of slow but sustained recovery. For FY21, however, government’s statistics office now estimates deeper contraction of 8% than earlier estimate of 7.7% contraction.