Merchandise exports crashed by almost 35% year-on-year in March to $21.4 billion, the sharpest monthly decline in at least three decades since liberalisation, and imports plunged by 28.7%, as the COVID-19 outbreak and a consequent lockdown since March 24 wrought havoc on external trade. Trade deficit narrowed to a 13-month low of $9.75 billion in March.
With close to a half of their orders cancelled now and the nation-wide lockdown extended up to May 3, exporters warn of a much steeper decline in both outbound and inbound shipments in April. In any case, key markets — the US and the EU — have been badly hit by the pandemic.
Merchandise exports, which had already contracted by 1.5% y-o-y up to February, ended the last fiscal with a 4.8% fall to $314.3 billion. Imports dropped 9.1% in FY20 to $467.2 billion.
Barring iron ore, exports of all the 30 major groups witnessed a contraction last month. The sharpest slide was witnessed in oil meals (70%), followed by meat, dairy and poultry (45.5%), engineering goods (42.3%), gems and jewellery (41%), leather and leather products (36.8%), plastics and linoleum (35.7%), garments (-34.9%) and carpets (34.7%). Petroleum product exports dropped 31.1%, partly due to a crash in prices, while rice exports declined by 28.3% and electronics goods by 21.5%.
Core (non-oil and non-gold) exports dropped by 34.2% in March, while such imports fell by 29.1%.
Overseas buyers are using the crisis to renegotiate contract terms and seek a cut in product prices. Domestic manufacturing units are shut and logistics chains in tatters, even though ports are functioning. However, with the government allowing some units to start operations, the situation is expected to ease in May, say exporters. But external headwinds and subdued domestic manufacturing continue to hurt exports. Even a depreciation of the rupee against the dollar is hardly any consolation, as the currencies of some of the competitors like Indonesia and Malaysia have weakened at a faster pace.
Most of the top 25 destinations for engineering goods exports are facing a lockdown. These 25 markets together accounted for $53 billion of the $71 billion worth outbound shipments of these products in the April-February period, said Ravi Sehgal, chairman of EEPC India.
The Federation of Indian Export Organisations president Sharad Kumar Saraf cited the cancellation of over 50% of orders, gloomy forecast, major job losses and rising NPAs amongst exporting units to urge the government to immediately announce a relief package for exports. “COVID-19 interest-free working capital term loan to exporters to cover the cost of wages, rental and utilities, EPF and ESIC waiver for 3 months from March to May 2020 and extension of pre- and post-shipment credit by 90-180 days on their maturity are the much needed steps to help the exporting community during such difficult and testing times,” he said.