India's exports rise 67% in May on low base effect, imports surge by 68.5%

All major export segments such as processed petroleum, electronics, engineering goods, gems & jewellery, textiles and pharma saw major growth in April. (Representative image)

India's merchandise exports shot up by 67.3 percent year-on-year (YoY) in May owing to a large base effect, after a rise of 193.3 percent in April. However, comparisons with May, 2019 showed exports have grown by 7.9 percent, indicating real recovery in the sector.

Preliminary data released by the Commerce and Industry Ministry on June 2 showed outbound trade rose to $32.2 billion in May, 2021 from $19.4 billion in April, 2020 when the COVID-induced lockdown was in full force.

However, the government drew attention to the fact that latest figures comfortably surpass those of May, 2019 as well, which is considered a normal export year, when exports stood at $29.85 billion.

The large rise over the past year is attributable to the extremely low volume of trade in 2020 due to the nationwide lockdown. However, the rise vis-a-vis 2019, is due to the opening up of key overseas markets such as the United States and European Union and the high global pries of commodities.

All major export segments such as processed petroleum, electronics, engineering  goods, gems & jewellery, textiles and pharma saw major growth in April. Exporters say that there has been a continued revival not only in the order booking positions but also in the demand from across the globe.

Exports were led by more than $3.56 billion worth of processed petroleum, over $3 billion worth of engineering goods and gems and jewelery totaling over $1.9 billion.
As per preliminary data released by the government, engineering goods export recorded a positive growth of 16.09 percent in May this year compared to the same month in 2019,  EEPC India Chairman Mahesh Desai, said.

"Some of the product categories which have maintained high growth rate in recent months are raw steel, products made from steel, industrial machinery and other value-added items," he added. Desai also expressed confidence that order books of exporters will remain strong owing to robust demand from buyers in US, EU and China.

However, policymakers have become most relieved at as non-oil, non-GJ (gold, silver & precious metals) in May 2021 rose by 46 percent over the past year and 11.5 percent over May, 2019.

Sharad Kumar Saraf, President of the Federation of Indian Export Organisations reiterated that though the government has announced a slew of measures to support exports, the need of the hour is to soon notify the RoDTEP rates to remove uncertainty from the minds of the trade and industry thereby helping in further forging new contracts with the foreigner buyers.

"The government must address some of the key issues including priority status to exports sector, extension of Interest Equalisation Scheme beyond June 2021 till atleast 31st March, 2024, release of the necessary funds for MEIS and clarity on SEIS benefits, resolving risky exporters' issues and continuance of seamless refund of IGST and more importantly continuing with IGST option for exports," he added.

Imports too witness a sharp growth

In May, imports, too, witnessed a sharp increase - up 68.5 percent to $38.53 billion. Imports had risen by 167 percent in April.

Compared to May, 2019, imports registered a decline of 17.4 percent, signaling both consumer and industrial demand are yet to reach pre-pandemic levels.

The largest part of the import bill - petroleum and crude oil - stood at $9.45 billion, up by 164.46 percent from May, last year when imports had crashed. But oil imports was nearly 25 percent lower than May, 2019. In the latest month, gold imports have also been muted. Imports were $4 billion less than May, 2019 when gold flows into India was strong.

India's trade deficit in May stood at $6.32 billion, down from $15.1 billion in April. This happened as the state wise restrictions widened, curbing domestic demand for both gold and oil, Aditi Nayar, Chief Economist, ICRA said. "A predominant 63 percent of the decline in the trade deficit in May 2021 relative to April 2021 was on account of the collapse in gold imports, with the balance led by a narrower oil deficit, led both by higher exports and lower imports," she added.

On a monthly basis, India's trade position has returned to the familiar deficit territory after witnessing a rare trade surplus of $800 million last year at the height of the COVID-19 pandemic-induced national lockdown. In March, it was $13.93 billion. Economists say that the trade deficit will continue to widen.