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Wednesday, January 20, 2021

Exports shrink for 3rd straight month, trade deficit widens

Exports in December dropped to $26.89 billion from $27.11 billion a year before. Imports rose to $42.60 billion last month from $39.59 billion a year earlier.

By: ENS Economic Bureau | New Delhi | January 3, 2021 3:09:58 am
Gujarat Exporters, guarat export containers, gujarat containers shortage, gujarat news, indian express newsThe rise in imports signals a possible revival of domestic demand, which was battered by the Covid-19 pandemic, as businesses go through a ‘reset’ phase following the unlock.

Contraction in merchandise exports narrowed to 0.8 per cent year-on-year in December 2020, compared to 8.7 per cent in the previous month, according to a preliminary estimate released by the Commerce Ministry on Saturday. But, imports rose at a faster pace of 7.6 per cent in December, the first increase since February, driving up trade deficit to a 25-month high of $15.7 billion.

The rise in imports signals a possible revival of domestic demand, which was battered by the Covid-19 pandemic, as businesses go through a ‘reset’ phase following the unlock.

However, some amount of pent-up demand for raw materials may also have contributed to the rise in imports, analysts say, preferring to wait longer to pronounce any sustained demand recovery. Nevertheless, if inbound shipments continue to rise, import-sensitive exports, too, will get a boost, but it will also mark a return to the usual high trade deficit trend. The outbound shipment of core products (goods excluding petroleum and gems and jewellery), which reflect the economy’s competitiveness, grew 5.2 per cent in December, against a 0.4 per cent fall in the previous month. Similarly, core imports rose 8.4 per cent last month, compared with a 1.7 per cent fall in November.

Exports in December dropped to $26.89 billion from $27.11 billion a year before. Imports rose to $42.60 billion last month from $39.59 billion a year earlier.


Already, hit by the pandemic, exports have witnessed a roller-coaster ride this fiscal. Having risen by 6 per cent in September, the first expansion since February, outbound shipments faltered by 5.1 per cent in October and 8.7 per cent in November before the contraction narrowed again in December. Interestingly, core exports have accelerated at a quicker rate than that of overall merchandise exports month after month since May 2019, according to an analysis based on data from Directorate General of Commercial Intelligence and Statistics.

Aditi Nayar, principal economist with ICRA, said: “The recovery in imports reinforces our expectation that the current account surplus will deflate to sub-$5 billion in the second half of this fiscal.” The expansion in non-oil exports is enthusing in light of the curbs imposed by major trading partners following the resurgence of Covid-19 cases, Nayar said.

The commodities that witnessed substantial rise in exports in December included certain cereals (262.6 per cent), oil meals (192.6 per cent), iron ore (69.3 per cent) and cereal preparations and miscellaneous processed item (45.4 per cent).

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