How do you see the export and import performance of India in August 2020?

The Commerce Ministry released the merchandise trade data for August 2020 and while exports have stagnated, imports have been moving up gradually. While total trade has picked up since April, it is still way below the higher levels of 2019.

Exports were clearly under stress for the sixth straight month since Mar-20. If you look at the exports on a YOY basis, the merchandise exports were down 12.7% to $22.7 billion in Aug-20. After a sharp dip in April, exports have now stabilized around current levels.

The exports were driven lower by its staple export items faltering. This was driven by a sharp fall in the shipments of petroleum, leather, engineering goods and gems & jewellery. Supply chain constraints and weak SMEs could be one reason for the stress on exports.

The saving grace was that India’s merchandise imports were also 29% lower at $29.47 billion, marginally higher than July. This leaves India with a merchandise trade deficit of $6.77 billion. In June, India had reported a small trade surplus after many years.

The rapid spread of COVID in the semi-urban and rural areas has impacted SMEs and thus hit rural supply chains. Oil imports were down 41.6% at $6.42 billion, largely driven by lower Brent Crude prices. Gold imports nearly tripled to $3.7 billion in Aug-20 on festive demand.

To the merchandise trade; if you add the value of services trade, then the overall trade deficit transforms into a small surplus of $0.13 billion. That overall surplus has narrowed considerably and that is the immediate challenge for India to work on.