Merchandise exports surged over 69% in May from a year before to $32.3 billion, driven by a favourable base and improved demand from key markets. Despite the second pandemic wave, exports were more than 8% higher than even the May 2019 (pre-pandemic) level, showed the provisional data released by the commerce ministry on Tuesday.
Having witnessed an impressive rate of expansion last fiscal in the wake of the Covid-19 outbreak, drug and pharmaceutical exports dropped by 5.4% in May to $1.9 billion, thanks to decreasing Covid cases in the US and the EU.
Goods exports have now crossed the pre-Covid (same months in 2019) level for three straight months, in what appears to be a strengthening trade recovery. The provisional estimate of export growth for May is higher than a preliminary one of 67% reported earlier.
Of course, export growth was low even before the pandemic – outbound shipments rose about 9% in 2018-19 but again shrank by 5% in 2019-20. So only a sustained uptick over the next 2-3 years would help recapture the lost heights.
Still, given the unprecedented crisis and localised lockdowns in key industrial states, the export performance in May 2021 was promising.
Imports, too, grew close to 74% to $38.6 billion in May, as the base remained conducive and domestic demand recorded a fragile recovery. However, the imports were still down by over 17% from the May 2019 level. Petroleum imports surged by 179% to $9.5 billion, reflecting rising crude oil prices, while gold imports spiked by 790% to about $679 million in May, driven primarily by a low base. Vegetable oil imports jumped 149% to $1.4 billion.
The sharp growth in trade in recent months, albeit supported by favourable base effects (exports were down by 36% and imports by almost 51% in May 2020), also suggests the supply side is able to respond better to a pick-up in demand from key markets. Of course, base effect will continue to aid trade growth in the coming months as well.
Trade deficit narrowed sharply to an eight-month low of $6.3 billion in May, against $15.1 billion in the previous month.
Importantly, core exports (excluding petroleum and gems and jewellery) climbed up by close to 47% in May from a year before, lower than the growth in overall merchandise shipments. Such exports recorded an almost 12% rise from the May 2019 level. Core imports rose 52% year-on-year but dropped by 3% from May 2019.
Analysts have already said sustenance of high exports (in absolute terms) in the coming months will signal a meaningful turn-around, as they cite the roller-coaster ride of exports in the wake of the pandemic last fiscal.
However, commerce secretary Anup Wadhawan last month exuded confidence that the current wave of the Covid-19 pandemic was unlikely to alter the export trajectory in the coming months and that the country’s external trade would continue to perform well.
Major commodities or groups (with exports in excess of $500 million) that have recorded high year-on-year growth in May included petroleum products (227%), gems & jewellery (179%), cotton yarn/fabrics/made-ups, handloom products etc. (138%), garments (114%), electronics (91%) and engineering goods (53%).