Surge in exports
Merchandise exports increased 45.8 percent year on year to $33.3 billion in August, owing to a favourable base, greater order flow from western markets, and higher global commodity prices. Exports also increased by 28 percent over the pre-pandemic (similar month in 2020) level, as advanced countries’ rebound boosted demand for goods.
According to the provisional figures issued by the commerce ministry on Tuesday, imports also rebounded strongly, up 51.7 percent from a year earlier and 18.2 percent from August 2019, indicating a larger trade recovery.
For the sixth month in a row, merchandise exports have surpassed the pre-pandemic level. Between April and August, exports totaled $164.1 billion, up 67.3 percent year over year and 23.3 percent compared to the same period in FY20.
Better than forecasts
Both export and import growth rates are slightly higher than the ministry’s early forecasts, which were announced this month. The trade gap increased to $13.8 billion, a four-month record.
As experts have pointed out, export growth had been slow even before the pandemic — outbound shipments increased by roughly 9% in 2018-19 but fell by 5% in 2019-20. As a result, only a sustained rise over the next few years will allow India to reclaim its former glory.
Furthermore, primary exports increased 31.9 percent year over year in August, lagging behind the 46 percent increase in overall merchandise exports, owing to a rise in international petroleum oil prices and a resurgence in ornaments exports following a decline last year.
Despite the supply-related constraints, the growth rate remains encouraging. It was also 28.7% higher than it was in August of this year. Core imports (excluding petroleum and gold) increased 37.3 percent year over year and 4.3 percent from pre-pandemic levels. Brent crude prices increased by 58 percent year over year in August.
Total goods imports were $219.6 billion in April-August, rising 80.9 percent from a year ago but just 4.4 percent from pre-pandemic levels. Petroleum products, gems and jewellery, engineering goods, cotton yarn, fabrics, made-ups and handloom products, and electronics were among the top export performers in August, with outbound shipments up 144 percent, gems and jewellery up 88 percent, engineering goods up 59 percent, cotton yarn, fabrics, made-ups and handloom products up 55 percent, and electronics up 32 percent.
In August, imports of metalliferous ores and other minerals increased by 238 percent, followed by iron and steel (109 percent), pearls, precious and semi-precious stones (93 percent), gold (82 percent), petroleum (81 percent), and coal (81 percent).
Frequently Asked Questions (FAQs)
What happens when the number of exports rises?
More exports indicate a greater level of output from a country’s manufacturing units and industrial facilities, as well as a larger number of people employed to keep these factories running.
When the trade deficit rises, what happens?
Domestic workers’ incomes are lowered as a result of the trade deficit, pushing many into lower income brackets. Families with lower incomes find it much more difficult to save. As a result, rising trade deficits have the potential to reduce national savings.
Is it better for a country to increase its exports or increase its imports?
If you import more than you export, you’re sending more money out of the country than you’re bringing in. On the other hand, the greater a country’s exports, the greater its domestic economic activity. More exports imply more output, employment, and revenue.