Exports surge in Dec, trade deficit widens

While merchandise imports in December 2021 were $59.48 billion, an increase of 38.55 percent over imports of $42.93 billion in December 2020, widening the trade deficit to $21.68 billion during the month, the government data showed on Friday.

India’s overall exports (merchandise and services combined) in December 2021 are estimated to be $57.87 billion, exhibiting a positive growth of 25.05 percent over the same period last year and a positive growth of 23.35 percent over December 2019.

Overall imports in December 2021 are estimated to be $72.35 billion, exhibiting a positive growth of 33.86 percent over the same period last year and a positive growth of 40.30 percent over December 2019.

“While the merchandise trade deficit in December 2021 pulled back from the levels seen in September 2021 and November 2021 benefitting from high exports ahead of the Christmas season, non-oil non-gold imports climbed very sharply,” said Aditi Nayar, chief economist of ICRA.

She pointed out that with the trade deficit in Q3 FY2022 exceeding the aggregate level recorded in the previous five months, the current account deficit is expected to touch nearly $30 billion in Q3 FY2022.

According to Nayar, the impact of the third wave may squeeze wedding demand for gold, helping the trade deficit to scale back somewhat from the average of $21.7 billion seen since September 2021.

The top sectors, which performed impressively during the month according to the Federation of Indian Export Organisations, were engineering goods, petroleum products, gems and jewellery, organic and inorganic chemicals, drugs and pharmaceuticals, electronic goods, rmg of all textiles, cotton yarn/fabrics/made-ups, handloom products etc, plastic and linoleum and rice.

“These constitute about 80 percent of exports and contributed about $30 billion. These exports have shown a growth of 41 percent during the month over December 2020,” said A Sakthivel, President FIEO.

In the April-December 2021 period, India’s overall exports (merchandise and services combined) are estimated to be $479.07 billion, exhibiting a positive growth of 36.31 percent over the same period last year and a positive growth of 20.25 percent over April-December 2019.

Overall imports in April-December 2021 are estimated to be $547.12 billion, exhibiting a positive growth of 57.33 percent over the same period last year and a positive growth of 18.57 percent over April-December 2019.

Non-petroleum and non-gems and jewellery exports in December 2021 were $28.92 billion, registering a positive growth of 29.67 percent over non-petroleum and non-gems and jewellery exports of $22.30 billion in December 2020.

Imports of this category (gold, silver and precious metals) were $35.47 billion in December 2021 with a positive growth of 34.28 percent over non petroleum, non-gems and jewellery imports of $26.41 billion in December 2020.

Nayar noted that while the improvement in exports was fairly broad-based, nearly 40 percent of the YoY increase in non-oil exports was on account of engineering goods.

The surge in non-oil non precious imports in December 2021 was led by electronic goods, fertilisers, chemicals and coal, all of which reported a YoY increase of more than one billion US dollars.