India registered a trade surplus for the first time in more than 18 years with the balance in June turning in the country’s favour at $790 million. Merchandise exports plunged 12.4% and imports fell 47.6% in June. In May, merchandise exports and imports had declined by 36.5% and 51.1%, respectively.
Exports of 12 out of 30 major items turned positive in June. The narrowing of exports contraction was led by growth in exports of pharmaceuticals (9.9%), chemicals (19.1%), iron ore (63.1%), rice (32.7%), cereals (19.3%) and fruits and vegetables (11%).
Among the 30 major items, imports of only vegetable oils (8.5%), pulses (0.1%), sulphur and unroasted iron pyrites (24.3%), and pharmaceutical products (0.3%) registered a growth. Petroleum, electronics and gold, the top three imports of the country, shrank in June. Oil Imports (largest component of import bill) stood at USD 4.93 billion in June at 55.29 per cent lower. Gold imports (second largest item in import bill) in June also dipped 77.42 per cent to USD 608.7 million. Non-oil, non-gold imports-an indicator of the strength of domestic demand- shrank a steep 42.2% in June.
In the first quarter of the year, exports fell 36.71% to $51.32 billion, while imports shrank 52.43% to $60.44 billion. India’s current account balance also recorded a marginal surplus at 0.1% of the gross domestic product (GDP) in the quarter ended March 31 after a gap of twelve years.
This Trade surplus is unlikely to be sustained, but India looks poised to run a large current account surplus for some time. The underlying dynamics of this trade surplus remain unpalatable, given the implications for the strength of domestic demand,” said Aditi Nayar, principal economist at ICRA. Indian Export Organizations expects the full year contraction in exports to reach 20% in case of a second wave of the Covid-19 pandemic.
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