Foreign trade in 2021: Record exports, Switzerland becomes 4th biggest import source

After a disastrous 2020, India’s trade picked up in 2021 as global demand from its biggest markets rose. Exports reached a new high but they were closely followed by burgeoning imports which signal both healthy domestic demand and foreign exchange losses.

On the other hand, import dependence on China was reduced for key items as more domestic value addition meant lower shipments of electronics from China.

But despite a series of restrictions aimed at Chinese goods, imports from the country shot up in 2021. Moneycontrol takes a deep dive into the data.

Headline figures rise

Highest ever exports

Merchandise exports rose to records in 2021. A glut of global demand raised levels of export orders since the beginning of the year. As factories and markets around the globe opened following months of lockdown, demand for India's exports rose across the board.

This pushed overall export earnings to above $300 billion in the first 10 months of the year. Officials now hope to crack the $400 billion target in the full 2021-22 financial year.

On the other hand, imports also rose to their highest level over a similar period. High import figures denote healthy industrial and consumer demand and the latest spate of imports in 2021 has been directly proportional to the sudden drop in the year before.

As the global supply chain failed, imports had crashed during the peak of the pandemic.

Interestingly, the trade deficit has been lower despite the surge in inbound trade. The $4.7 billion trade deficit recorded in January-October is the lowest in a decade, and the first time since 2015 that deficit has fallen to below $ 10 billion.

Export basket diversifying

Largest export categories

While a global super-cycle kept commodity prices high across the board throughout 2021, exports saw significant support from finished products as well. Policymakers have marked 2021 as the year when exports of high-value, finished goods took hold significantly.

Since coming to power, the government has pushed labor-intensive manufacturing to simultaneously boost productivity, job creation and export.

After six years of trying to substitute industrial raw materials and agri items with products that are higher up the value chain, India saw an increasingly diversified export basket.

Engineering items constituted the second largest category in exports till October. According to the Engineering Exports Promotion Council, this was sustained by tapping into a broader network of market beyond Europe and North America. Finding cheaper sources of copper ore beyond Indonesia and Chile also helped keep primary prices low for both domestic items and export products.

Electronics exports also continued to maintain pace, registering nearly $15 billion. Pushed up by the performance-linked incentive scheme of the government, electronics exports rose by more than $ 2 billion from 2019. Exports of mobile phones and components rose to $4.7 billion, up from $3.3 billion in 2019.

Meanwhile, after a year of national lockdowns and sluggish shipping movement, demand for industrial and consumer commodities skyrocketed in 2021.

New trade partners

Largest trade partners

The United States, followed closely by China and the United Arab Emirates were India's largest trade partners in calendar year 2021. This traditional troika has been the top three nations in New Delhi's trade list for the past decade.

China had become India's top partner just before the Covid 19-pandemic hit, but in 2021, the US wrested back the top spot. New Delhi's strenuous ties with China have affected trade volumes as policymakers tried to cut Chinese imports.

However, imports from China again gained pace in 2021. Imports jumped by 21 percent even compared to 2019 figures. This was despite India managing to reduce import dependence on China across several key categories such as electronics and machineries.

Interestingly, Switzerland became the fourth largest source of imports for India, by value of the consignment. More than $23 billion worth of unwrought gold came in from the country in the January-October period of 2021, up from just $ 5 billion in the same period of 2020.

Meanwhile, Bangladesh became India's fourth-largest source of exports. This was due to a rise in flows of limestone, cotton, sugar and most interestingly rice.

The country is one of the largest producers of rice globally with cereal being a staple diet of almost the entire population. Yet, more than $895 million worth of parboiled rice made its way across the border to Bangladesh in 2021, up from just $12 million in he previous year. Exports to neighbouring Nepal also went up by 66 percent.

Outside the neighbourhood, India's exports to a more diverse set of countries gained a foothold. Nations like Netherlands, Belgium, Indonesia, Australia and Turkey received more Indian shipments this year.

Officials say all these nations have remained for long, prominent middle order trading partners. But concerted efforts at targeted exports based on specific demand, more B2B connections and increasing awareness of Indian products, are finally bearing fruit.