COVID-19 epidemic primary factor behind lowest trade deficit in five years: rating agency

Acuite Ratings & Research has said that the trade data release for March confirms what was already visible – a sharp reduction in the trading trade deficit. India had a trade deficit of only $ 98.6 billion in FY21, the lowest in the last five years and nearly 50 percent lower than the levels seen in FY19. Acuite, clearly, stated that economic disruption coupled with a sharp drop in crude oil prices and a jump in commodity exports have also contributed to such a correction in the deficit in FY21.

Consolidated trade deficit for goods and services decreased from $ 70.2 billion to $ 12.7 billion in FY15, with net trade for services stabilized at $ 86 billion versus $ 83 billion.

However, FY21 is a deviation and the increasing normalization and recovery of the economy from H2 FY21 has gradually pushed the monthly trade trade deficit to an average level of $ 13 billion to $ 15 billion, seen in FY 19-20.

The steady pick-up that gold imports have normally contributed to after December 2020 was $ 8.49 billion in March 2021.

Despite a large base effect due to the lockdown in March 2020, 60.3 percent growth in overall exports in March 2021 has been far more broad-based than in earlier months, with a healthy revival in the petroleum products and gems and jewelery sector. From steady shipments in engineering goods, pharmaceuticals, chemicals and primary commodities like rice and iron ore.

On the other hand, Acuite said, with non-crude and non-gold imports gradually importing has become normal (adjusting for a sharp jump in gold imports) is also broad-based and 47.3 in March 2021. On a yoyo basis with a percentage increase.

It is worth noting that there is a strong growth of 60.1 per cent in capital goods imports, reflecting a possible uptick in capital expenditure, although its stability needs to be seen at a gradual level.

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