February merchandise exports up 25%, imports surge 36%

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Merchandise exports hit $34.6 billion in February, having risen by 25.1% from a year earlier and 24.6% from the pre-pandemic level (same month in FY20), the commerce ministry said on Monday.

However, a 36.1% jump in imports to $55.5 billion inflated trade deficit to $20.9 billion in February from a five-month low of $17.4 billion in the previous month. Analysts said this will keep current account deficit (CAD) at an elevated level at a time when the global crude oil prices have flared up in the wake of the Russia-Ukraine crisis.

According to an ICRA estimate, the CAD may have crossed 3% of GDP in the October-December period of this fiscal for the first time since the June quarter of 2013. This may, however, recede a tad in the last quarter of this fiscal, it said.

Moreover, given the tangled global supply chains in the aftermath of the Russia-Ukraine war and consequent surge in international shipping costs, Indian exporters will find it difficult to ship out products on time and honour supply commitments in the coming months.

Keeping with the recent trend, imports were driven by elevated crude oil prices and massive purchases of coal and cooking oil.

Given that the export between April and February hit $374.8 billion, up 46.1% from a year before, it is set to cross the ambitious $400-billion target set by the government for FY22 and reach about $410 billion. This is despite potential short-term risks to the global supply-chain from the Russia-Ukraine conflict, some exporters said. A spurt in demand for goods in the wake of an industrial resurgence in advanced economies and global commodity price rise have boosted exports this fiscal, after a Covid-induced slide in FY21.

Importantly, merchandise exports had remained below par in the past decade, having fluctuated between $250 billion and $330 billion a year since FY11; the highest export of $330 billion was achieved in FY19. So, a sustained surge in exports for a few years will be crucial to India recapturing its lost market share, analysts have said.

The official data showed petroleum products were the biggest driver of exports with a year-on-year surge of 88%. Huge rise was also reported in the exports of electronics (35%), engineering goods (32%), cotton yarn, fabrics, made-ups, etc (33%) and garments (19%).

As for imports, among the key commodity segments, purchases of coal jumped 117%, petroleum rose 67% and electronics rose 30%.

ICRA chief economist Aditi Nayar said: “For FY23, we project the current account deficit at 2.8% of GDP if the crude oil price averages at US$115 per barrel, the likelihood of which will crucially depend on the duration of the geopolitical tensions.” A Sakthivel, president of the exporters’ body FIEO, said the sectors that have performed well in February included several labour-intensive ones, “which itself is a good sign”. “However, the over 36% surge in imports in February “is a point of concern and should be analysed”, he added.