India’s exports of ‘core’ products, or goods excluding petroleum and gems & jewellery, have accelerated at a quicker pace than that of overall merchandise exports month after month since May 2019, belying even Covid-induced disruptions.
The ‘core’ exports, which reflect the economy’s competitiveness in external trade, grew 60.7%, year-on-year, in March to $27.3 billion, compared with a record 58.2% jump in overall goods exports to $34 billion, according to a preliminary estimate of the commerce ministry. Of course, the record surge in March was greatly aided by a base effect (exports had crashed in March 2020 due to the pandemic and the beginning of a lockdown). Nevertheless, the pace of growth was still encouraging.
While Covid-19 has hit exports of all products, what comes as a relief is the sustenance of the greater momentum in core exports than in overall outbound shipments.
In February 2020, when Covid-19 was yet to take roots in India, core exports had grown at 5.7%, while total goods exports had inched up by only 3.3%, showed the data available with the Directorate General of Commercial Intelligence and Statistics.
However, as oil prices pick up and as gold imports spike, the value of petroleum and gem & jewellery exports may rise and threaten to reverse this trend, say analysts. Already, gems and jewellery exports jumped by about 76% in March to $1.5 billion. Gold imports, which were hit by the pandemic and a spurt in prices earlier last fiscal, surged by 584% to almost $7.2 billion.
Gems and jewellery exports collapsed by almost 34% till February last fiscal, as a pan-India lockdown and migration of workers from key cities like Surat disrupted operations of most jewellers, especially in initial months. Imports of inputs, too, plunged. Similarly, a crash (42% till February) in petroleum product exports was mainly driven by moderating global crude oil prices, especially in the first three quarters of FY21 from a year before, when the rates crashed in the range of 28-54%. These weighed on overall merchandise exports, which dropped by 7.4% to $290 billion in FY21.
Within the core export category, agriculture & allied products, drugs & pharmaceutical and ores & minerals proved resilient and recorded expansion.
Exports of rice jumped by more than 31% up to February last fiscal to $7.7 billion, while those of drugs and pharmaceuticals surged by almost 16% to $22.1 billion. Even iron ore exports jumped 76% to $4.2 billion.
While both ‘core’ and overall exports have witnessed a roller-coaster ride in FY21 due to the pandemic, given the favourable base effects, outbound shipments are going to record an impressive surge in the coming months.
Already, presenting a less gloomy picture, the World Trade Organization (WTO) had in October forecast global merchandise trade to rise by 7.2% in 2021 after an estimated 9.2% drop in 2020. Still, India faces significant challenges from a potential second wave of Covid-19 if the surge in cases in certain states, especially Maharashtra, are not contained swiftly.