India posted its first trade surplus in nearly two decades due to Covid-19-led drop in demand for crude oil, gold and other merchandise goods.
Gold imports, which is the second largest in the import basket after crude oil, contracted over 77%, while petroleum and crude oil contracted over 55%.
The trade surplus in June stood at $790 million. This is the first since January 2002.
Merchandise imports contracted 47.59% in June to $21.11 billion from a year ago. Exports too fell 12.41% to $21.91 billion, the government data showed.
Non-oil, non-gold imports fell 41.37% to $15.57 billion in June 2020. The decline was more pronounced compared to a 33.47% drop in May.
The last time India had a trade surplus was in 2002. The nation’s economy saw a $10 million trade surplus back then.
But the fall in exports contrasted the government’s claim that India’s exports have bounced back in June.
Commerce and Industry Minister Piyush Goyal had said last month that exports in the first week of June at $4.94 billion have bounced back to almost the same level of $5.03 billion during the same period a year ago.
The World Trade Organization has estimated the global merchandise trade to decline by upto 32% in 2020 because of the virus impact.
Economists, however, predict that trade surplus is unlikely to be sustained as domestic demand will return to normalcy once the Covid-related restrictions come to an end.
“The relative improvement in exports is encouraging for India’s growth prospects, but the persistent weakness in imports is a reflection of selective sectoral lockdowns, lower commodity prices and weak underlying demand. A goods trade surplus is unlikely to be sustained, as India’s domestic demand is inching back towards normalcy,” Rahul Bajoria, chief India economist at Barclays, said.
Exporters body chief Sharad Saraf said with the global trade forecast showing a gloomy picture, there is an urgent and immediate need for a special exports package for the employment and labour-intensive sector of exports for reviving India’s foreign trade sector. Besides implementation of the economic measures announced, creation of an Export Development Fund with 1% corpus of the total value of exports during the last fiscal, MEIS of 2% across the board and 4% for labour-intensive sectors and addressing “risky exporters” issues are some of key concerns, which should be considered to give a much-needed boost to the exports sector and the overall economy.