Exports fall 36% in May, trade deficit narrows to $3.15 bn

Barring rice, spices, iron ore and pharmaceuticals, all the remaining 26 key sectors registered negative growth in May. Imports too plunged 51 per cent to $22.2 billion in May.

Contracting for the third straight month, India's exports shrank 36.47 per cent in May to $19.05 billion on weak global demand due to COVID-19, leading to significant decline in shipments by key sectors like engineering, petroleum and textiles, as per a government data.

Imports too plunged 51 per cent to $22.2 billion in May, leaving a trade deficit of $3.15 billion, compared to $15.36 billion in the same month previous year.

However, the dip in exports during the month under review is low as compared to 60.28 per cent fall in April.

Barring rice, spices, iron ore and pharmaceuticals, all the remaining 26 key sectors registered negative growth in May, according to the commerce and industry ministry data released on Monday.

It included Gems and jewellery (-68.83 per cent), leather (-75 per cent), petroleum products (-68.46 per cent), engineering goods (-24.25 per cent), and ready-made garments (RMG) of all textiles (-66.19 per cent).

Oil imports in May declined by 71.98 per cent to $3.49 billion, while non-oil imports dipped 43.13 per cent to $18.71 billion, the data showed.

Excluding project goods, sulphur and unroasted iron pyrites, 28 key import sectors like gold, silver, transport equipment, coal, fertiliser, machinery and machine tools have recorded negative growth during the month.

Gold imports in May fell 98.4 per cent to $76.31 million.

Commenting on the numbers, Trade Promotion Council of India (TPCI) Mohit Singla said that there has been a positive movement to catch growth, which has been under bad weather due to deadly pandemic.

"Food commodities have always been a staple demand driver owing to its essential nature. We must capitalise to its inherent strength and strategies to make it more robust for the country growth," Singla said.

Federation of Indian Export Organisations (FIEO) said there is drastic arrest in the fall of exports during the month as compared to April and this has been because of the partial start of units across the country and order enquiries from the markets like the US and EU.

"Revival still seems a very slow process as the global business sentiments are at its lowest, impacting the supply chain and bringing slump or recessionary conditions in the economies across the world," FIEO president Sharad Kumar Saraf said.

He also expressed his "serious" concerns over the sharp decline in employment-intensive sectors of exports, which has ramifications for the jobs in the country, as domestic demand will also not be robust.

Icra Ltd principal economist Aditi Nayar said the relatively contained pickup in imports suggests that domestic demand remained muted during the lockdown.

"Based on the expectation of a gradual further normalisation in trade levels in the coming months, a stabilisation in crude oil prices at a moderate level, a revival in demand for gold closer to the festive season, and the continued adverse impact of economic uncertainty on remittances, we now project India to report a current account surplus of $12-15 billion in FY2021," she said.

Cumulatively, during April-May 2020, exports fell 47.54 per cent to $29.41 billion, while imports shrank by 5.67 per cent to $39.32 billion.

Trade deficit stood at $9.91 billion during the two months of the current fiscal.

Oil imports in April-May 2020-21 were $8.15 billion, 65.79 per cent lower as compared to $23.82 billion in the same period last year.

Since 2011-12, India's exports have been hovering at around $300 billion. During 2017-18, the overseas shipments grew by about 10 per cent to $303 billion and further to $330.08 billion in 2018-19 and $314.31 billion in 2019-20.

Commerce and Industry Minister Piyush Goyal has recently said the situation at export front is improving significantly as "our export in the first week of June, is at par with what it was in June 1-7, 2019".

Exports during June 1-7 this year dipped by only about  0.76 per cent to $$4.94 billion from $5.03 billion in the same period last year, the minister has informed.

Photograph: Issei Kato/Reuters