India’s merchandise exports slumped by a record 34.6% in March while imports declined 28.7% as countries sealed their borders to combat the covid-19 outbreak.
In February, merchandise exports had rebounded 2.9% after falling for six months in a row.
Of the 30 major items each in India’s export and import baskets, 29 saw a contraction in March, signalling the severity of the impact of the coronavirus pandemic on global demand. Only iron ore exports (58.4%) and import of transport equipment (11.9%) recorded a growth during the month.
Engineering Export Promotion Council chairman Ravi Sehgal said the sharp drop in merchandise exports was not a surprise with major economies of the world in a state of lockdown. “April would be worse as international trade excepting medicine and essential supplies has come to a near halt. Exporters are facing a question of survival," he added.
During FY20, India’s exports contracted 4.8% to $314.3 billion while imports shrank 9.1% to $467.2 billion, leaving a trade deficit of $152.9 billion.
The World Trade Organization (WTO) has projected global merchandise trade to plummet between 13% and 32% in 2020 due to the covid-19 outbreak. “The wide range of possibilities for the predicted decline is explained by the unprecedented nature of this health crisis and the uncertainty around its precise economic impact. But WTO economists believe the decline will likely exceed the trade slump brought on by the global financial crisis of 2008-09," it said last week.
Sharad Kumar Saraf, president, Federation of Indian Export Organisations, said with cancellation of over 50% of orders, gloomy forecast, major job losses and rising bad loans among exporting units, the government should immediately announce a relief package for exporters as any further delay would be catastrophic. “The huge support given by various economies to exports will put Indian exports in further difficulties as when the size of the cake reduces, competition intensifies with focus on prices," he added.
World Bank in its latest South Asia Economic Focus said reduced external demand for manufacturing as well as services exports will impact India. “One of India’s largest exports is business and professional services, consisting of business process outsourcing (BPO) such as technical support and call centres largely based in India. This sector is severely affected. Lockdown measures, both in origin and destination countries, have forced offices to close as their
infrastructure is heavily geared towards in-office working. There is also a concern that external demand will drop precipitously even beyond the lockdown period, as clients cut costs. This situation will certainly mean fewer new projects, as well as the scaling back of existing ones," it added. However, the bank said India’s balance of payments position may improve. “Weak domestic demand, low oil prices and COVID-19-related disruptions are expected to narrow the current account deficit to 0.2% in FY21 and to keep it low in the following years," it added.