By: G. SRINIVASAN, Senior Journalist
India’s aggregate exports, including merchandise goods and services, bounced back during the first quarter of the current fiscal (April-June) even in the face of the second wave of the pandemic, heralding hope for the recovery to be on durable and robust lines.
Latest data reveal aggregate exports rose almost 32 percent to $49.85 billion in June from the year-earlier month and were 17.17 percent higher than the pre-Covid level of June 2019. Imports too were rising with exports by logging close to 74 percent at $ 52.18 billion in June year-on-year and 1.08 percent higher than in June 2019.
While merchandise exports leapt by 48.3 percent to $ 32.5 billion in June and were 30 percent higher than June 2019, the services exports based on an estimate stood at $ 17.35 billion or 9.1 percent higher than June 2020 and about one percent lower than June 2019.
A notable development pertains to surging merchandise exports and relatively moderate gold and oil imports in May-June 2021 pushed the aggregate trade deficit to a three-quarter low of $ 31 billion in the first quarter of this fiscal which is a salutary augury on the balance of payments (BoP) front. The distinct decline in oil imports followed high fuel inventories India built with refiners curtailing purchases in the wake of renewed lockdowns in May that is now lifted across pan-India from early this month.
India’s non-oil, non-gold imports have stayed above the $ 25 billion mark for the seventh month in a row, presaging the much-hoped revival of domestic activity. Import growth during the first quarter of the current fiscal to has been broad-based with 28 sectors out of 30 major sectors expanding over a year ago.
A noteworthy point is that with global merchandise trade regaining momentum, India posted robust export growth. In its latest monthly bulletin, RBI avers that India’s merchandise exports surpassed the $ 30 billion dollar mark for the fourth successive month in June 2021. Besides, non-oil export growth has been in the positive zone for the tenth consecutive month up till now. This exhilarating expansion was broad-based with as many as 25 out of the 30 major commodity groups picking up traction over pre-pandemic levels, including engineering goods, petroleum products, organic and inorganic chemicals, agriculture and allied products, cotton yarn, and plastics.
With the evident positive features on the foreign trade front as both export and import increase being in synchronicity, optimism abounds that this year’s merchandise export target of $ 400 billion dollar may be realizable if the first quarter trends persist in the rest of the quarters, trade analysts say. In this backdrop, authorities have not lowered guard on the Balance of Payment front, as they relentlessly mop-up of foreign exchange reserves for both prudential and commercial purposes in the prevalent uncertain world economic times. India’s forex reserves surged to $ 611.9 billion as of July 9 this year, from $ 516.4 billion dollars a year ago. India is now the fourth largest forex reserves holder after China, Japan, and Switzerland.
It needs to be qualified that with the inflation rate in the US edging up, the ultra-low interest rate regime there might get tapered off anytime by the Federal Reserve as such a fear was stoked in 2013 when the taper tantrum threatened the global financial stability.
As such, any probable run on the rupee by the emerging strength of the dollar needs to be guarded against by the RBI intervening in the market to absorb the taper shock. As such, the hefty forex reserves the country’s central bank has in its armory for action offer a vibrant cushion against any onslaught on the rupee value in the global exchange markets, going forward.
In all, the emerging macroeconomic fundamentals augur well for the economy as it wrestles with the pandemic-spurred slowdown, bolstered by the positive foreign trade, the accumulated forex reserves, and the high inflow of foreign funds through FDI and equity investments providing the requisite prop.