The pace of contraction of India’s exports slowed in July even as outbound shipments shrank for the fifth consecutive month and the country’s trade balance posted a deficit after registering a surplus after 18 years in June. Gold imports grew after eight months. The previous growth in gold imports was in November 2019.
Exports contracted 10.21% to $23.64 billion in July while imports fell 28.4% to $28.47 billion. Trade deficit was $4.83 billion compared to a $790 million surplus in June.
Sixteen out of the 30 selected major commodities of export grew last month with certain employment generating sectors including ceramics, jute, cotton yarn and carpets exhibiting growth.
In an encouraging trend, exports excluding petroleum products and gems and jewelry rose in July led by engineering goods, drugs and pharmaceuticals and iron ore, among others. Gems and jewelry exports continued to shrink even though gold imports rose implying that the precious metal is being used for investment purposes amid the ongoing pandemic, instead of re-exports as jewelry.
Nayar added that this trend is likely to strengthen in the coming months, as demand for non-oil non-gold imports starts to normalise, gold imports gather steam around the festive/marriage months, and crude oil demand and prices stabilise at a moderate level.
Among imports, oil and electronics, showed slower declines than last month at 31.9% and 4.3%, respectively while gold imports were up 4.17% on year last month.
FIEO said business/order enquiries are coming from almost all major economies like the US, EU, Canada, Japan, South Korea, Australia and New Zealand which helped in bringing the exports sector to almost 90% of the level seen in July 2019.
Nayar said domestic demand appears to be emanating from the lockdown-induced torpor.
Non-oil, non-gold imports-an indicator of the strength of domestic demand shrank 29.15% last month. Imports of machinery, transport equipment and machinery continued to shrink.
Total merchandise imports fell by more than 46% to $88.91 billion during April-July while exports were down 30.21% from the year-ago period to $74.96 billion. FIEO has sought a special exports package for reviving India’s foreign trade, and redressal of "risky exporters" issues.