In Charts: Covid Delivers A One-Two Punch To India’s Foreign Trade
India’s foreign trade nosedived in April as lockdowns across many nations hit supply chains and a fall in incomes hit demand.
The one-two punch meant that India’s monthly exports in dollars fell to levels not seen since 2006. Imports are at the lowest since 2009. The simultaneous fall in imports and exports, however, has meant that the country’s trade deficit has narrowed to $6.8 billion.
“As expected, the level of merchandise exports and imports collapsed in April 2020, resulting in a compression in the merchandise trade deficit to $6.8 billion in that month from $15.3 billion in April 2019,” said Aditi Nayar, principal economist at ICRA Ltd. The proportion of oil and non-oil items in the trade deficit remained largely unchanged at 50 percent.
“While the contraction in non-oil imports was broad-based, two-thirds of the same in absolute terms was concentrated in items such as gold and precious stones, electronic goods, machinery and coal. In the current environment, we expect the imports of gold and precious stones to remain subdued even after the lockdown is lifted,” Nayar said.
A large part of the problem was also disruptions at ports.
“Covid-19 restrictions resulted in a near complete closure of ports, with the increasing congestion leading to rising processing times for imports and exports,” said Rahul Bajoria, chief India economist at Barclays.
Equally, the slowdown in trade activity, when put together with other indicators, is a reflection of demand. “The slowdown in trade activity remains another reflection of the sharp disruption to economic activity in India. Data released earlier showed an unprecedented collapse in PMI, significant weakness in industrial production and a near closure of rail and air traffic, reflecting a complete breakdown of commercial activity,” Bajoria said.
Exports: Lowest Since 2006
India’s merchandise exports amounted to $10.36 billion in April 2020, as compared to $26.07 billion in April 2019, contracting by 60.28 percent. On a sequential basis, exports halved, contracting by 51.6 percent in the span of just a month.
How Top Exports Fared
Among India’s major commodity exports, gems & jewellery contracted by 98.74 percent on an annual basis. A mere $36 million in gems and jewelry were exported in April.
Among other key categories, engineering goods exports are down from over $7.2 billion in February to $2.3 billion in April. Organic chemicals along with drugs and pharmaceuticals have seen a lower impact.
Imports: Lowest Since 2009
Merchandise imports were at $17.12 billion in April 2020, 58.65 percent lower than the $41.40 billion reported in April 2019. Between March and April, imports fell by 45.05 percent.
Gold Imports Crash To Near Zero
Gold saw the starkest fall.
Compared to imports worth $1.6 billion in January, India imported almost no gold in April, with the value of imports in this category pegged at a mere $2.8 million.
How Other Top Imports Fared
Among major imports, the value of oil imports saw a steep fall due to the fall in prices. Volume data for the month of April isn’t yet available.
Electronic goods imports contracted by 62.72 percent on an annual basis. Between March and April, imports of electronic goods fell by half. Machinery and transport equipment fell sharply too.
Organic and inorganic chemicals and inputs like coke and coal saw relatively lower declines.
Non-Oil Non-Gold Imports
Among broad classifications of imports, non-oil and non-gold imports were at $12.46 billion in April 2020, contracting by 52.18 percent annually. Month on month, they fell by 37.5 percent.