India's exports dip 8.74% in Nov; trade deficit narrows to $9.87 bn
India’s outbound shipments contracted for the second consecutive month in November after recording positive growth just for a month in September, as the second wave of the coronavirus pandemic hit consumer demand in India’s largest markets in Europe.
Exports fell 8.7% while imports contracted 13.3%, resulting in a 10 month high trade deficit of $9.9 billion, according to revised trade data released by the commerce ministry.
China’s exports, in contrast rose 21.1% in November, the fastest growth since February 2018, while imports grew 4.5%, leading to a record trade surplus of $75.4 billion.
Major Indian export items that dragged down growth include petroleum products (-59.7%), engineering goods (-8.1%), chemicals (-8.1%), readymade garments (-1.2%) while pharmaceuticals (11.1%), gems & jewellery (4.1%), electronic goods (1%) registered positive growth. Items that drove imports and trade deficit include non-ferrrous metals (9.1%), chemical products (36.1%), electronic goods (12.3%), fertilizers (29.3%) and gold (2.7%).
Aditi Nayar, principal economist at ICRA Ltd said the slide in non-oil export growth was led by renewed restrictions in trading partners that outweighed the optimism related to an early availability of Covid-19 vaccines. “This trend may continue in the winter months, before an uptrend takes root in Q4 FY21. ICRA expects the size of the merchandise trade deficit to nearly double in Q3 FY21 relative to Q2 FY21, with imports recovering on the back of an improvement in economic activity, a rise in commodity prices and pick-up in demand for gold during the festive and marriage season," she added.
Nayar added that she expects current account surplus to decline substantially in Q3 FY2021 and Q4 FY2021 from its level of $19.8 billion in Q2 as the domestic recovery strengthens. “Overall, ICRA expects India’s current account balance to post a sizeable surplus of $35-40 billion or around 1.5% of GDP in FY21, in contrast to the deficit of $25 billion or 0.9% of GDP in FY20," she added.
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