Imports crashed 58.65 per cent to just $17.12 billion in April, according to the data released by the commerce and industry ministry on Friday, as crude oil imports were drastically cut and gold inflows almost wiped out. As a result, the monthly trade deficit reduced to just $6.76 billion, the lowest since May 2016, when it stood at $6.27 billion.
“Twenty-eight of the 30 major product groups saw the highest-ever double-digit negative growth of up to 99 per cent during April 2020. Even large quantities of petroleum exports could not push value-wise exports as international prices were at rock bottom,” said Sharad Kumar Saraf, president of the Federation of Indian Export Organisations.
Policymakers, however, worry that the knock-on effects of April's historically low exports may cut short outbound trade in FY21 as the March-June period is crucial in the export cycle for many sectors such as apparels and engineering goods. Engineering goods saw a 64 per cent contraction, following a 42.3 per cent fall in the previous month. The sector accounts for nearly one-fourth of the foreign exchange earned through exports, and exporters have maintained that a lack of liquidity has crippled the sector.
"Exporting units, especially in the engineering sectors, are largely MSMEs and face an existential crisis. While the MSME package would provide liquidity infusion, the units need straightforward fiscal support measures like the waiving of electricity charges and water bills, and wage support for survival," Engineering Export Promotion Council India Chairman Ravi Sehgal said. Readymade garments, the sector in which India’s export competitiveness has steadily fallen over the past financial year, managed to push out just $126.31 million in April, registering a 91 per cent fall.
Despite several nations ordering major quantities of drugs and pharmaceuticals from India, exports just saw a marginal 0.25 per cent rise in April, after going down by more than 22 per cent in March. The same was true for gems and jewellery, which slid by 99 per cent and sent out only $36 million worth of products.
Receipts from the volatile processed petroleum exports fell by 66 per cent in April to just $1.24 billion as global oil prices crashed amid a major slump in global demand.
As a result, the largest component of the import bill – crude oil – saw the cost of inbound shipments fall by 59 per cent to $4.6 billion, a major change after the 15 per cent drop in March. Gold, the second-largest item in the import bill, witnessed incoming shipments get almost obliterated. Imports fell by an unprecedented 99 per cent to just $2.83 million.
Non-oil and non-gold imports — an indicator of domestic industrial demand — fell for the 18th month, contracting 52.08 per cent. "Despite the graded relaxations, the levels of merchandise exports and imports are likely to remain subdued in May as well. However, a pause in remittances may prevent a current account surplus in the first quarter of FY2021," said Aditi Nayar, principal economist, ICRA.