Defying external headwinds and a Covid-induced gloom, India’s ‘core’ exports that reflect the economy’s competitiveness, grew at their fastest pace in 18 months in September. This suggests a gradual return towards normalcy and brightening of the prospect of an early recovery.
The outbound shipment of core products — goods excluding petroleum and gems & jewellery — grew 11.1%, year-on-year, in September to $21.1 billion, reversing a 3.2% decline in the previous month, according to a preliminary estimate of the commerce ministry. This was double the pace of expansion recorded in February, when Covid-19 was yet to take roots in India.
Meanwhile, overall goods exports grew just 5.3% in September to $27.4 billion, against a 12.7% contraction in August, as per the data from the Directorate General of Commercial Intelligence and Statistics. Gems and jewellery exports have collpased this fiscal, as a pan-India lockdown and migration of workers from key cities like Surat disrupted operations of most jewellers. This hurt overall merchandise exports.
Exports of rice jumped by more than 92% in September to $346 million, while those of drugs and pharmaceuticals surged by 24.4% to $439 million. These two were the best performing export segments last month.Even core imports were down by only 12.8%, year-on-year, in September to $21.8 billion, compared with a 19.6% fall in overall goods imports to $30.3 billion.
While these are still early days, the rebound in core exports in September points at a potential pick-up in external demand in the build-up to the crucial Christmas season, when orders from the key western markets — the US and the UK — flow in large volumes. Of course, some pent-up demand and despatches against orders firmed up before the pandemic may also have contributed to the decent rise. Nevertheless, these are encouraging signs, analysts concur.
Aurodeep Nandi, India economist at Nomura, told FE: “A part of the recovery that we observe, not just in exports but also imports, is explained by the inevitable normalisation back to pre-pandemic activity levels as the pandemic curve flattens and lockdowns get relaxed. The phenomenon of recovery in core exports outpacing that of core imports is indicative of the chasm between external demand and the more sluggish domestic demand”.
Nandi said Nomura’s leading index for exports in Asia (ex-Japan) has been rising in the past four consecutive months, indicative of improving global outlook. “Nevertheless some caution is warranted — new waves of Covid-19, eventual ebbing of pent-up demand, and uncertainty around global trade tensions, have the potential of materialising as stiff headwinds,” he added.
Already, presenting a less gloomy picture, the World Trade Organization this month expected global merchandise trade to fall by 9.2% in 2020 from last year, compared with the 12.9% drop projected in April. This will augur well for India’s trade as well.
However, the multilateral trade body noted that downside risks remain if resurging outbreaks of Covid-19 stall economic recovery. Also, it trims its global trade growth forecast for 2021 to just 7.2% from a strong rebound of 21.3% it had predicted earlier.
India’s exports had witnessed a record 61% crash in April in the wake of the lockdown, although the contraction subsequently narrowed to 12.7% in August.