India's performance in the external sector had crashed since November, when growth had reached 0.8 per cent.
Despite contracting only once in FY19, the low growth rates have decimated the government's hope of reaching the $350-billion trade target. Cumulative exports in the first 11 months of the current financial year stand at $ 298.5 billion.
Major exports sputter
In February, 12 of the 30 major product groups were in negative territory. Prime among them was engineering goods. Despite earning one-fourth of foreign exchange through exports, the sector grew at a marginal rate of 1.7 per cent, up from 1 per cent in the previous year.
Another major export earning sector — gems and jewellery — continued to contract. Periodically falling into the negative zone in November, the $3.72 billion worth of exports in the sector contracted by 2 per cent in February, after a growth of 6.67 per cent in January.
A spin-off effect due to a global trade war between the US and China had also affected India’s trade, affecting both imports and exports, Ganesh Kumar Gupta, president, Federation of Indian Export Organisations (FIEO) said. Exporters have reiterated his demand for urgent support, including augmenting the flow of credit and better fiscal support.
However, drugs and pharmaceuticals exports remained steady at 16.11 per cent growth, up from the 15.2 per cent in January.
Receipts from processed petroleum exports also remained muted, declining by 7.7 per cent after a 19 per cent fall in January.
While declining oil prices marred the chances of earning the same dollars through exports, it helped India save foreign exchange through a slowdown in imports.
Imports dive deep
However, the largest component of the import bill, crude oil, saw inbound shipments declined by 8 per cent, up from the 3.59 per cent fall in the previous month. Global crude prices started reducing from early November and a supply glut is expected to stay as sanctions continue to pump out oil, while the US adds fracking capacity.
Gold, the second-largest component of the import bill, also saw a sharp drop in inbound shipments. Imports of the metal fell by 10.81 per cent in the latest month to $2.58 billion. The rate of fall has surprised industry watchers as January had seen a 38 per cent jump in inbound shipments. The industry continues to see volatility as imports had risen in July after remaining in negative territory for six months.
Imports of the metal had remained low since the Rs 143-billion Nirav Modi scam earlier this year.
Non-oil, non-gold merchandise imports, showcasing industrial demand saw contraction sharpen in February. It contracted by 3.72 per cent to $ 24.30 billion, as compared to a fall of 0.8 per cent in January.