India’s merchandise exports slipped back into the contractionary zone in February, declining by 0.25 percent, after registering a rise over the previous two months. Released on March 2, the preliminary figures for February have lent more credence to the fears of economists and exporters that consistent growth in the sector remains a long way off.
After rising by 6.16 percent in January and 0.14 percent in December, export earnings declined in February as trade in major foreign exchange earners such as petroleum, gems & jewellery and engineering goods continued to take a hit. Outbound trade stood at $27.7 billion, according to the Commerce and Industry Ministry. The data shows cumulative exports in the first five eleven of the financial year fell 12.32 per cent to $255 billion, as compared to the same period in the previous year.
With an 18.6 percent share of India's Gross Domestic Product, the third quarter (October-December) of 2020-21 saw the contribution of exports to economic growth drop to its lowest in the current financial year. Analysts and exporters say that this is not expected to improve in the next quarter, given the poor performance of outbound trade in the current quarter.
In February, petroleum products, the biggest revenue earner, registered a 28 percent decline albeit better than the 32 percent decline seen in the previous month. Industrial products such as engineering goods also continued de-growth. Shipments of exports of engineering goods fell 2 percent, following an 8 percent fall in the previous month. The sector accounts for nearly one-fourth of foreign exchange earned through exports.
Imports rise
On the other hand, imports rose by 7 percent to $40.5 billion, after January's 2 percent rise. The rate of growth of inbound goods have continued to accelerate. After witnessing a rare trade surplus of $800 million last year at the height of the national lockdown, the trade deficit has also continued to climb up. In February, it rose by more than 25 percent to $12.8 billion. However, the latest rise was mostly attributed by experts to a 123 percent surge in gold imports, reflecting pent-up demand as well as elevated prices, with expectations of further imports in the run-up to the festive season.
The sector is most worried about the Rs 25,000-30,000 crore worth of tax refund under the erstwhile Merchandise Exports from India Scheme (MEIS) they are yet to receive, even as they wait for clarity on its successor tax benefit scheme.
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