Trade Sector Updates – Falling Exports, TIES, MEIS, Foreign Trade Policy, etc.

A demand problem contributing to lower imports

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Trade surplus

Mains level : Paper 3- India's import and exports

India registered a trade surplus after almost two decades. But this is not the result of a sudden rise in India’s export. It is due to subdued import indicating the low demand.

What latest data indicate

  • Data released by the commerce ministry indicate a contraction in exports observed over the past few months easing slowly.
  • But the continuing contraction in import which indicates low demand is worrying.
  • This is trend is leading to the growing gap between import and export.

India registered a trade surplus: what it indicates

  • This growing gap led to India registering a trade surplus of nearly $800 million in June.
  • This is the first time in almost two decades that the country has registered a trade surplus.
  • But does this mean that India’s exports have grown drastically?
  • No. It is a sign of collapse in domestic demand.

Merchandise exports growing trends

  • India’s merchandise exports continue to witness an upward swing.
  • The pace of contraction fell to 12.4 per cent in June, from 36.2 per cent in May and 60 per cent in April.
  • Exports of items such as iron ore, drugs and pharmaceuticals, chemicals and various agricultural commodities saw an expansion in June.

What growing exports and falling import indicate

  • An upswing in exports could be indicative of a faster recovery of India’s export partners.
  • Restrictions on economic activities in some of these countries had eased earlier.
  • Other reason could be the rush by Indian exporters to ship out orders to meet their seasonal deadlines.
  • Imports continue to remain deep in negative territory.
  • The contraction in non-oil exports has actually worsened with decline observed in both consumer and investment/industrial goods imports.
  • Some movement is visible in imports of electronic goods.
  •  But the import of machinery and transport equipment has not moved significantly.
  • Of the 30 main import items, only four registered mildly positive growth in June — this indicates the pace of the domestic slowdown.

Conclusion

Economic activities across the world will take time to return to normalcy, India’s exports will take time to reach pre-COVID levels. It seems that the chasm between exports and imports could persist, given the plateauing of the post-lockdown spurt in demand/production.

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