Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research on August 2020 Trade data
"We continue to witness a significantly lower trade deficit in the current fiscal with a sharp drop of 73.1% for the five month period April-August to USD 20.72 billion as compared to USD 77.25 billion in the previous year. While a steady pickup in exports took place in the April-July period, there has been a slight MoM decline in August to USD 22.7 billion as compared to USD 23.6 billion in the previous month. Given the overall decline in global demand, the 12.7% YoY decline in merchandise exports is not surprising and reflects the challenges that Indian exporters will continue to face in stepping up its shipment levels. The product segments that have continued to suppress the overall export volumes are petroleum products and gems and jewellery where the exports have dipped YoY by 39.9% and 43.3% respectively. It is encouraging, however, to note a sustained growth in exports of agricultural and pharmaceutical goods. On the other hand, the recovery in imports have also slowed down in August with a MoM growth of only 3.5%, reflecting the slower revival in industrial demand which largely follows from the prolonged impact of the pandemic. However, the 26.0% contraction in imports on a YoY basis is also linked to the significant drop in global crude prices in the last one year. In our opinion, the merchandise trade deficit is unlikely to witness any significant increase over the next few months and will lead to a current account surplus in FY21."