India turns net exporter in June; posts trade surplus of USD 790 million

For the first time in nearly two decades, India posted a trade surplus of USD 790 million in June, thanks to a sharp fall in imports due to a demand plunge amid the coronavirus crisis, official data released on Wednesday showed. Merchandise imports contracted 47.59% in June to USD 21.11 billion from a year ago, while exports fell 12.41% to USD 21.91 billion, leading to a marginal trade surplus. India thus, although expectedly for a short time, turned a net exporter for the first time since January 2002.

The Ministry of Commerce and Industry said India’s overall exports (merchandise and services combined) in April-June are estimated to be USD 101.02 billion, exhibiting a negative growth of (-)25.92% over the same period last year. Overall imports in the same quarter are estimated to be USD 89.31 billion, exhibiting a negative growth of (-)45.10% over the same period last year. Taking merchandise and services together, the overall trade surplus for the April-June quarter is estimated at USD 11.70 billion as compared to the deficit of USD 26.32 billion in April-June 2019-20.

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Merchandise exports

Exports in June were USD 21.91 billion, as compared to USD 25.01 billion in June 2019, exhibiting a negative growth of (-)12.41%. Major commodity groups which have recorded negative growth during June 2020 vis-à-vis same period last year are gems and jewellery (-50.06%), leather products (-40.47%), textiles (-34.84%) and petroleum products (-31.65%). Non-petroleum and non-gems and jewellery exports in June were USD 18.48 billion, as compared to USD 19.15 billion in June 2019, exhibiting a negative growth of (-)3.51%.

Imports

Imports in June fell by 47.59% from USD 40.29 billion last year to USD 21.11 billion in 2020. Oil imports dipped 55.29% to USD 4.93 billion in June while gold imports fell 77.42% to USD 608.7 million. Non-oil and non-gold imports – an indicator of strength of domestic demand – shrank by a whopping 41.37% last month to USD 15.57 billion. Also indicating weakness in the domestic manufacturing sector, imports of machinery, electrical and non-electrical goods contracted by 42.02%.

It is important to note that the Indian economy is driven by consumer demand and a fall in imports reflects that the demand shock caused by the COVID-19 pandemic and a subsequent four-month lockdown is actually crippling recovery. India began to ease restrictions starting June as part of the 'Unlock' phase which has been continued in July. A drag on exports is expected to linger as large urban clusters remain under curbs due to unabating caseload.

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