Why are exports once again weak in the month of October as per government data?

Government released its broad data on October 2020 trade. Of course, the full data will be released in the middle of October by the Ministry of Commerce. But, the first take is that exports have actually fallen trade deficit has widened back to $8.8 billion in Oct-20.

Surprisingly, there is a very weird issue that is causing this problem. It is about the shortage of containers. That is one reason the charges for containers have gone up sharply in the last few months. Currently, Indian exporters are faced with a steep shortage of containers to move goods to global venues.

Just look at the irony. In the last few months, the export of merchandise goods has picked up rapidly but imports are yet to see the same level of pick-up. Now, this has become a problem because India is exporting big volumes to countries like the US but imports are absolutely tepid.

As a result, the containers go out of India laden with goods to the US but these same containers are forced to come back empty or just partly laden. It needs no reiteration that it adds to the cost of the entire trade and in majority of the cases makes an absolute mess of the economics of the deal for the exporters.

Let me explain this point for you. Saudi Arabia sends a ship of crude oil to India and takes back a variety of items of daily needs. That is a comfortable situation to have because the costs are in check. But in the Indian case, she is running a huge trade surplus with the US and that is creating this mismatch in trade.