By: Dr. LEKHA S CHAKRABORTY, Professor NIPFP & Research Affiliate, the Levy Economics Institute, New York
India’s merchandise exports hit an all-time high of US$ 95 billion in the first quarter of the Financial Year 2021-’22. Mercantile trade is one component of the current account. The mercantile trade deals with the trends in exports and imports. In June, we had a trade deficit as exports were not growing relatively better than imports.
India is a net importer in June 2021 with a trade deficit of $ 9.4 billion, according to the data released by the Ministry of Commerce on July 2, 2021. This is because India’s merchandise exports in June 2021 was USD$ 32.46 billion, and the merchandise imports was US$ 41.86 billion. However, in June 2020, India was a net exporter with a trade surplus of $0.70 billion.
India’s exports increased by 47 .34 per cent due to the growth in the sectors like gems and jewellery, engineering and petroleum products. Exports in June 2021 at $32.46 billion is an impressive rise when compared to exports in June 2020 which was $22 billion. The top 5 commodity groups of export which have recorded positive growth during June 2021 vis-à-vis June 2019 are other cereals (299.29%), iron ore (134.46%), organic and inorganic chemicals (62.41%), cereal preparations and miscellaneous processed item (56.63%), and oil meals (53.99%).
The reforms in the foreign trade sector including simplification of procedures, the extension of timelines and licenses are significant determinants of export performance. Another important reform in foreign trade policy is RoDTEP, which is the remission of duties and taxes on export products. Commerce & Industry Minister Piyush Goyal said that RoDTEP is at a very advanced stage of inter-ministerial discussion, and revised rates will be notified by October 2021. He mentioned that it has been a colossal task to study 11,000 items and arrive at new rates. RoDTEP refers not to a subsidy to any exporter, it is only a refund of taxes.
The June 2021 data published by Commerce Ministry shows that only 2 commodity groups of import that have shown a fall in June 2021vis-à-vis June 2020 are silver(-91.38%) and project goods(-12.49). As per the June 2021 data, the top five commodity groups of import which have shown a fall in June 2021 vis-à-vis June 2019 are silver ( by -97.16%), gold(by -64.04%), project goods (by -53.69 %), cotton raw and waste (-51.03 %) and newsprint(-45.05 %).
If we deduct petroleum and gems and jewellery from the exports, it is $ 28.11 billion in June 2021. The non-petroleum, non-gems, and jewellery exports in June 2021 was US$ 25.69 billion, registering a positive growth of 38.53% over US$ 18.54 billion in June 2020. This is also a positive growth of 33.61% over US$ 19.23 billion in June 2019.
On the import side, if the oil imports are deducted, in June 2021 India has reached US$ 31.9 billion. The data shows that non-oil imports in June 2021 was US$ 31.19 billion. This is an increase of 90.68% compared to US$ 16.36 billion in June 2020 and an increase of 4.56% compared to US$ 29.83 billion in June 2019.
If we deduct oil and Gold, Silver & Precious Metals (non-oil, non-gold ) from imports it was US$ 27.63 billion in June 2021. This is a positive growth of 84.53% compared to non-oil and non-gems imports of US$ 14.98 billion in June 2020 and a positive growth of 12.51% over US$ 24.56 billion in June 2019.
The data showed that the five major commodity groups of export showing negative growth in June 2021 over June 2019 are cashew (-44.86%), tea (-25.08%), leather and leather manufactures (-21.0%), textiles (-18.76%), and gems and jewellery (-10.76%). The major import items that showed positive growth in June 2021 over June 2019 are sulphur & unroasted iron pyrites (270.96%), medicinal and pharmaceutical products (132.19%), vegetable oil (118.87%), pulses (110.75%), professional instruments, and optical goods, (70.88%).
Despite Covid, the country saw the highest ever FDI inflow of $81.72 billion in 2020-21. FDI inflow of $6.24 billion in April 2021 is 38% higher than April 2020, said Piyush Goyal, Minister of Commerce and Industry, highlighting the Indian economy’s resolve to bounce back after the devastating second wave of the Covid-19 pandemic.