Trade deficit hits $26 billion on rising imports; June exports up 23.52% to $40.13 billion

Source: Financial Express, 15 July 2022

Merchandise exports rose 23.5% in June from a year before even on an unfavourable base but a steep 57.6% jump in imports on the back of elevated global commodity prices drove up trade deficit to a new monthly record of $26.2 billion.

With this, trade deficit in the June quarter jumped to a record $70.8 billion, way above that of $31.4 billion in the same quarter last fiscal, according to the provisional data released by the commerce ministry on Thursday.

This will likely inflate the country’s current account deficit for the first quarter of FY23 to more than 3% of GDP, compared with 1.5% in the previous quarter, according to some analysts.

Given the fears of recession in top markets (US and the EU), which have contributed immensely to India’s stellar export performance in FY22, external demand for Indian merchandise may falter in the coming months. The global supply chains, despite some improvement in recent weeks, still remain tangled.

Of course, with softening commodity prices, some pressure on the CAD front is expected to ease in the second half of this fiscal. Moreover, the dramatic rise in imports for a second straight month (even without oil and gems & jewellery, imports jumped as much as 38.3% in June) signals improving domestic demand that had remained subdued for months in the wake of the Covid outbreak.

Exports increased to $40.1 billion in June, a record for the third month of any fiscal, and the growth is slightly higher than May’s 20.6%. Core exports grew 8.7% in June, against 8.6% in the previous month but well below 19.9% in April.

But imports spiked to $66.3 billion from $42.1 billion a year before, driven by a 99% jump in purchases of oil and petroleum products, 261% in coal and 183% in gold.

A spurt in prices inflated petroleum and coal import bill substantially, while massive gold imports were partly driven by jewellers’ bid to build inventory to cater for some pent-up demand. This is partly because many marriages were last year postponed to 2022 due to the pandemic, as pointed out in the finance ministry’s economic report for June. Fitch Ratings has already warned of a doubling of India’s CAD in FY23 to about 3.1% of GDP. Of course, senior government officials have assuaged concerns about financing the CAD.

Among high-value segments, the rise in exports in June was led by petroleum products (119%), followed by electronics (61%) and garments (50%).

Aditi Nayar, chief economist at Icra, said while the elevated trade deficit for June poses some upside risks to the CAD for Q1FY23, “the correction in commodity prices has softened the outlook for the ongoing quarter, even though export growth may undergo a slowdown amidst a weaker outlook for the global economy. She projected a modest downsides to our FY23 CAD forecast of $105 billion or 3% of GDP.”

A Sakthivel, president of the apex exporters’ body FIEO, said the spike in imports is a matter of concern. However, the decent export growth “indicates the strength of the export sector amidst challenging ongoing geo-political and rising global uncertainties”.

India’s exports expand 24% in May, trade deficit widens sharply

Source: Hindustantimes, 16 June 2022

India’s total exports, including goods and services, in May grew 24% over a year ago to $62.21 billion, but trade deficit also rose sharply to $15.44 billion in the month compared to a $1.38 billion trade surplus in the same month last year on the back of a 59% spike in imports to $77.65 billion, according to official data.

According to experts, the high trade deficit in May was on account of higher merchandise imports in terms of value due to global supply chain disruptions, inflation and domestic manufacturers building inventories to secure themselves from future supply shocks.

Provisional data released by the commerce ministry on Wednesday showed unprecedented growth in imports of key inputs such as energy and precious metals, necessary for domestic manufacturing and exports. Gold import in May saw 789% year-on-year growth to $6 billion, coal (173% to $5.42 billion), petroleum (103% to $19.2 billion), and silver (2,800% to $446 million).

Higher services exports at $45.87 billion in May compared to $28.48 billion imports helped bring down the overall trade deficit, which also signified rapid recovery in services segment that was badly hit by Covid-19 pandemic.

May saw merchandise exports of $38.94 billion (20.55% y-o-y growth) and imports of $63.22 billion (62.83% y-o-y jump), according to the data. The highest growth in exports in the month was for petroleum products ( $8.55 billion, a 60.87% jump over $5.31 billion in the same period last year) because many domestic refiners are exporting automobile fuels overseas for better price realisation. There was also growth in electronic goods, leather products, coffee, cereal preparations, and oil meals.

India’s overall exports (merchandise and services combined) in April-May are estimated to be $124.59 billion, a growth of 25.90% over the same period last year, the commerce ministry said in a statement. The data is provisional because services trade figures are extrapolations .

“The data for May 2022 is an estimation, which will be revised based on RBI’s subsequent release,” the ministry said in a statement.

The merchandise exports in the first two months (April-May) of 2022-23 were $78.72 billion as compared to $63.05 billion during the same period last year , a 24.86% growth. The estimated value of services export for April-May 2022 was $45.87 billion, g a growth of 27.71% vis-a-vis $35.92 billion in April-May 2021, it added.

Total imports (merchandise and services combined) in May were estimated to be $77.65 billion, a growth of 59.19% over the same period last year. Overall imports in the first two months of current financial year (April-May) were estimated at $151.89 billion, a growth of 45.44% over the same period last year, the ministry said in its statement.

Saon Ray, professor at the Indian Council for Research on International Economic Relations (ICRIER), a think-tank, said: “The trade deficit is on account of merchandise trade and not services… However, we must unpack what we are importing and exporting to shed some light on the trade deficit. The data shows an improvement is exports of services, which is a good sign since services trade was badly hit in the aftermath of the pandemic.”

Federation of Indian Export Organisations (FIEO) president A Sakthivel said the “highest-ever exports” in May shows “the continuous resilience of the exports sector” amidst rising global uncertainties.

India’s merchandise exports crossed $421.8 billion for the first time ever in 2021-22 and services exports also surged an all-time high at $254.4 billion in the fiscal year.

“Labour-intensive sectors also contributed to the exports basket, which itself is a good sign, further helping job creation in the country,” Sakthivel added, expressing confidence that the benefits of recently signed free trade agreements (FTAs) with Australia and the UAE, and the productivity-linked incentive (PLI) scheme will further help India’s exports.

He said rising imports of gold may lead to impressive gems and jewellery exports in the next 1-2 months.

India’s sugar exports to grow up to 10 mln tonnes in SS22 on lower output in Brazil: Report

Source: Economic Times, 30 May 2022

The country’s sugar exports are expected to increase to around 9-10 million tonnes in sugar season 2022, beginning October, following lower production in Brazil due to adverse weather conditions, according to a report. Ind-Ra expects the total exports for SS22 (Sugar Season 2022) to rise to 9-10 million tonnes, surpassing the previous high of 7.2 million tonnes shipped in SS21, as the lower production in Brazil (which is down 40 percent year-on-year in first 1.5 months ended mid-May 2022) due to adverse weather conditions and delayed harvesting.

Brazil is the largest exporter of sugar, constituting 35-45 percent of the global trade, and a fall in its exports in the current season could result in India’s share rising to around 15 percent, the Ind-Ra report stated.

However, Ind-Ra believed exports were anyway unlikely to exceed 10 million tonnes, given the rebound in production in Thailand after two consecutive seasons of decline.

As a result, the restriction is unlikely to materially affect the sector, although any issues in the mill-wise approval process could act as a dampener, it added.

Meanwhile, with two successive seasons of production deficit, international sugar prices hit a five-year high of over 20 cents per pound in April 2022, averaging around 19 cents per pound till now in SS22.

While India’s export restriction has not affected prices meaningfully, prices are likely to remain robust with a lower cane output and sugar mix in Brazil, which bodes well for Indian exports, Ind-Ra said.

It said that despite producing a high-quality sugar, the competitiveness of Indian exports is affected by the country’s high cane costs relative to other major producers, including Brazil, Thailand and Australia, rendering exports unviable without subsidy until about a year back.

After hitting a historical high of 14.6 million tonnes at the end of SS19, sugar stocks have been moderating, it added.

Despite an increase in the production, higher exports and diversion towards ethanol are likely to reduce the sugar stock further to around 7 million tonnes at end-SS22, although still higher than the normative carry forward requirement of around 5.5 million tonnes.

India’s gross sugar production (before ethanol diversion) increased to 38.3 million tonnes in SS22 (up to mid-May), up 5.8 million tonnes mainly due to an increase in the production in Maharashtra and Karnataka, it said.

However, with a likely increase in sugar diversion towards ethanol to 3.4 million tonnes (SS21: 2 million tonnes), the net sugar production is likely to come in at 35.5 million tonnes while consumption could continue to grow at around 2 percent, increasing to 27.2 million tonnes in SS22.

Therefore, while consumption is likely to grow at a modest rate of 1-2 percent, the increase in cane diversion towards ethanol growth would result in an exportable surplus of 6-8 million tonnes in SS23 (depending on cane output), hence maintaining a healthy domestic balance, it added.

Negotiations going on for signing of FTAs with the UK, EU and Canada: MoS Anupriya Patel

Source: Financial Express, 10 May 2022

India was expected to conclude free trade agreements with the United Kingdom, Canada, and the European Union before this year-end, Union Minister Anupriya Patel said here on Tuesday.

The Minister of State in Commerce and Industry said the country’s trade was “passing through a watershed moment” as it clocked USD 675 billion on exports while merchandise exports accounted for USD 419 billion last year.

“We (The Ministry) are also in process of negotiations on the signing of free trade agreements with the United Kingdom, Canada, and Russia and they may be concluded before the end of the year,” she said.

Patel was speaking at the Stakeholder’s Outreach Programme organised by Directorate General of Foreign Trade on the occasion of India signing a Comprehensive Economic Partnership Agreement with the United Arab Emirates and the Economic Cooperation Trade Agreement (ECTA) with Australia.

Noting that exports are vital for the growth of a country, she said India concluded the agreement with Australia in just 88 days and it was one of the fastest-ever agreement signed. “It is a very comprehensive agreement,” she said.

She pointed out that the India-UAE Comprehensive Economic Partnership Agreement was already “operationalised” and there was huge scope in terms of employment generation.

“Besides employment generation, these agreements will also lead to increase in remittances following the increase in the Indian diaspora (in the two countries),” she said.

India’s exports up 24% to $38 bn in April; trade deficit widens to $20 bn

Source: Business Standards, 04 May 2022

India’s merchandise exports in April grew 24.2 per cent year-on-year to their third-highest level ever of $38.2 billion on the back of higher commodity prices amid the ongoing Russia-Ukraine war, the preliminary trade data released by the commerce ministry showed on Tuesday. The preceding month had witnessed record outbound shipments of $42.2 billion.

Imports in April surged 26.6 per cent to $58.3 billion, leading to a trade deficit of $20.1 billion during the month. Petroleum products (113.2 per cent), electronic goods (64 per cent), and chemicals (26.7 per cent) led the growth in exports in April, while engineering goods (15.4 per cent), pharmaceuticals (3.9 per cent), and readymade garments (16.4 per cent) registered sub-par growth. On the other hand, the export of gems and jewellery (-2.1 per cent) and rice (-14.2 per cent) contracted during the month.

The robust growth in imports in April came despite a 73 per cent drop in gold imports to $1.7 billion.

Import growth was led by coal (136.4 per cent), crude oil (81.2 per cent), chemicals (46.9 per cent), vegetable oil (33.6 per cent), and electronic goods (28.6 per cent).

Aditi Nayar, chief economist at ICRA, said unless commodity prices receded appreciably, she expected the merchandise trade deficit to print above $20 billion for most of FY23. “The increase in the merchandise trade deficit was entirely on account of oil. Although the non-oil trade deficit remained stable, there was a shift in its composition, with a plunge in gold imports being offset by a rise in non-oil non-gold imports such as coal and chemicals — an unsavoury yet expected fallout of the higher commodity prices engendered by the Russia-Ukraine conflict,” she said.

Engineering Export Promotion Council Chairman Mahesh Desai said while engineering goods exports continued the growth momentum set in FY22 despite geopolitical challenges, high logistics cost and unprecedented increases in raw material costs had been hurting the engineering and other sectors. “While the trade deals with the UAE and Australia are expected to give a boost to the sector, the proposed free trade pacts with other countries like the UK and Canada would further give impetus to exports from India,” he said.

Prospects for the global economy have darkened since the outbreak of the war in Ukraine on February 24. The World Trade Organisation (WTO) last month lowered its 2022 global trade forecast to 3 per cent from 4.7 per cent due to the ongoing conflict and a potentially more transmissible Omicron subtype fettering China. Despite comfortably crossing the $400 billion export target in FY22 by $20 billion, the commerce ministry has not projected any fresh target for FY23 given the uncertainty surrounding world trade.

Services exports touched all-time high at USD 250 bn in FY22: Piyush Goyal

Source: Economic Times, 13 April 2022

Commerce and Industry Minister Piyush Goyal on Wednesday said services exports touched an all-time high of around USD 250 billion (about Rs 19 lakh crore) in 2021-22.

The previous highest level was USD 213 billion (about Rs 16 lakh crore) in 2019-20.

“We have achieved the USD 250 billion target despite the fact that sectors like tourism and travel was hit by the COVID pandemic… These are the highest ever services exports,” he said at a briefing.

However, this is provisional data and the figure may increase once the final data is released, he added.

Further, Goyal said the services basket is now increasing and “from low cost services, we are moving up the value chain”.

When asked about the exports target for the current fiscal for both goods and services, he said officials are already engaging with the stakeholders.

“From Friday, I am starting a round of talks with export promotion councils,” he said, adding that the prime minister would also take feedback and then “we will set the target”.

However, these are challenging times because of the pandemic and the ongoing conflict, he noted.

On the impact of Russia-Ukraine war, he said India’s total trade with these two countries are “very” large.

India’s exports to these countries would be in the range of about USD 2.5-3 billion while imports are in the range of about USD 10-11 billion.

“There are few sectors which may get impacted” but increasing engagement with countries like Australia, and the UAE would help in boosting trade,” the minister said.

Ukraine is the world’s biggest sunflower oil producer and India imports almost all of its sunflower oil from there. Sunflower oil is India’s second biggest imported edible oil after palm oil.

Goyal said that India was a major player in this segment and “now again we are discussing with the farmer associations and the states to see how we can boost oil seed production in the country”.

India can look for alternative sources of supply to meet any short term disruption in supply, he added.

When asked about rising inflation, Goyal said the food grain situation is comfortable and the likely good monsoon would further increase the supplies.

He said that the whole world has been impacted by the Russia-Ukraine conflict and the effort of the government would be to become Aatmanirbhar in more areas.

Regarding rupee-rouble trade with Russia, Commerce Secretary BVR Subrahmanyam said that “no official talks are going on for this”.

Instead, the government is trying to facilitate payments for the exports already made to Russia from banks which are not covered by sanctions, he added.

India’s overall exports (merchandise and services) touched an “all-time high” of USD 669.65 billion in April-March 2021-22, jumping by 34.50 per cent over the year-ago period.

“Services sector has achieved an all-time high despite services like tourism, aviation and hospitality being severely affected due to the COVID-19 pandemic,” Goyal said.

At another event of engineering exporters, the minister pitched for manufacturing world-class products for both domestic and export purposes.

Goyal, who also holds the consumer affairs portfolio, said “we take every complaint very, very seriously and now we have started acting with tough penalties on those who are mis-selling or misleading advertisements or trying to skirt the law. There we are trying to take serious actions.”

The minister urged exporters to adopt an uncompromising stance when it comes to ensuring quality.

“We must not let quality culture weaken in the country,” he cautioned.

Further, Goyal said India has the potential to export both goods and services worth USD 1 trillion each by 2030.

Engineering good exports account for more than 25 per cent of India’s USD 400 billion-plus outbound shipments. The sector has recorded 45 per cent growth in 2021-22 and touched USD 111 billion.

Indian goods exports reach $400 bn for first time ever, says PM Modi

Source: Business Standards, 23 March 2022

India has for the first time clocked goods exports worth $400 billion, said Prime Minister Narendra Modi on Wednesday, calling it a “key milestone” for his government’s Aatmanirbhar Bharat for self-reliance in manufacturing.

Modi made the statement on Twitter as India’s services and manufacturing activity held steady in February, even as the war in Ukraine clouds the outlook for prices and growth in the consumption-driven economy.

“India set an ambitious target of $400 Billion of goods exports & achieves this target for the first time ever. I congratulate our farmers, weavers, MSMEs, manufacturers, exporters for this success,” he said posting a graphic showing the target being met nine days ahead of deadline..

All eight high-frequency indicators compiled by Bloomberg News showed activity was steady last month, with the needle on a dial measuring so-called ‘Animal Spirits’ staying put at 5 for the eighth straight month. The gauge uses the three-month weighted average to smooth out volatility in the single-month readings.

Commerce ministry to start online module for filing registration for interest equalisation scheme

Source: Financial Express, 15 March 2022

The commerce ministry on Tuesday said it has decided to operationalise a new online module for filing of electronic registration for interest equalisation scheme for exporters, a move aimed at effective monitoring of the scheme.

On March 9, the RBI extended the scheme for pre- and post-shipment rupee credit for MSME exporters till March 2024.

Under this, exporters get subsidies for pre- and post-shipment rupee export credit.

The interest rates under the scheme have been revised downwards to 2 per cent and 3 per cent for specified categories of MSME manufacturer exporters, as against the earlier rates of 5 per cent and 3 pre cent.

“In order to capture granular data about the beneficiaries of the scheme and its effective monitoring, it has been decided to operationalise a new online module for filing of electronic registration for Interest Equalisation Scheme (IES) w.e.f. April 01, 2022,” the Directorate General of Foreign Trade (DGFT) said in a trade notice.

It said all exporters seeking benefits under the scheme need to apply online by navigating to the DGFT website.

A Unique IES Identification Number (UIN) will be generated automatically which is required to be submitted to the concerned bank when availing interest equalisation against their pre- and post-shipment rupee export credit applications.

The UIN generated would have a validity of one year from the date of registration, during which an application for availing benefit of IES can be submitted to the concerned bank.

The auto generated acknowledgement containing UIN needs to be submitted to the concerned bank along with the prescribed application by the bank, if any, for availing benefit under IES, it added.

“It will be mandatory for exporters to submit UIN acknowledgment to concerned banks for all applications made on or after April 01, 2022,” it said.

Exports up 25.1 pc to USD 34.57 bn in February; trade deficit widens to USD 20.88 bn

Source: Financial Express, 14 March 2022

India’s exports rose 25.1 per cent to USD 34.57 billion in February on account of healthy growth in sectors like engineering, petroleum and chemicals, even as the trade deficit widened to USD 20.88 billion, according to data released by the commerce ministry on Monday.

Imports during the month too jumped 36 per cent to USD 55.45 billion, with inbound shipments of petroleum and crude oil surging 69 per cent to USD 15.28 billion. Trade deficit — the difference between imports and exports — stood at USD 13.12 billion in February 2021.

“Merchandise exports for the period April-February 2021-22 was USD 374.81 billion as against USD 256.55 billion during the period April-February 2020-21, registering a positive growth of 46.09 per cent,” the ministry said.

Imports during the 11-month period rose 59.33 per cent to USD 550.56 billion. Trade deficit during this period widened to USD 175.75 billion as against USD 88.99 billion during April-February 2020-21.

According to the data, gold imports in February dipped by 9.65 per cent to USD 4.8 billion. Imports of electronic goods rose about 29.53 per cent to USD 6.27 billion. Exports of engineering goods, petroleum and chemicals in February increased by 32 per cent, 88.14 per cent and 25.38 per cent to USD 9.32 billion, USD 4.64 billion and USD 2.4 billion, respectively. Pharmaceutical exports, however, slipped by 1.78 per cent to USD 1.96 billion in February.

Exporters seek freight support, flag refund issues with government

Source: Economic Times, 08 March 2022

Exporters have sought freight support from the government, and flagged the issues of pending goods and services tax (GST) refunds and the status of various export incentive schemes.

In a meeting with commerce and industry ministry on Tuesday, exporters said that freight support is much required. With crude oil prices soaring to their highest since 2008 at $139 per barrel amid the Russia-Ukraine conflict, container rates have risen ten-fold in less than a fortnight while war insurance premiums are up 3-5%, as per sources.

“We are unable to execute exports as most of them would be made at a loss with high freight charges,” said a representative of an export body who participated in the meeting.

India’s merchandise exports in April-February FY22 were $374.05 billion, up 45.8% year-on-year while imports rose 59.21% to $550.12 billion.