India’s Performance in Merchandise Exports in August 2019

  May 30, 2020

India’s Performance in Merchandise Exports in August 2019

What is merchandise trade?

Trade includes goods and services. Merchandise comprises imports and exports of goods.  Services are shown separately. 

What were the numbers of merchandise foreign trade in August?

Exports fell for the second time in three months, while imports declined for the third successive month. Exports dropped over 6% to $26.1 billion in August as 22 of the 30 major sectors — including petroleum, engineering, leather, textiles and gems and jewellery — saw a fall in the value of shipments.

Imports were down 13.5% to $39.6 billion, led by oil and gold. While crude oil shipments fell nearly 9% to $10.9 billion, gold imports through the official channel crashed 62.5% to $1.4 billion in August 2019 compared to $3.6 billion a year ago.

What does it mean?

In the first quarter, GDP growth has slowed to a six-year low of 5%.

Why did the gold imports fall?

The de-growth (fall) in gold imports is because of the recent increase in prices of the precious metal, which has contributed to the contraction in imports of stones and precious metals as well. Such imports may revive to some extent in the festive season. 

How did the trade deficit narrow down?

Steeper fall in imports compared to exports led to the trade deficit narrowing to $13.5 billion in August, as against $17.9 billion in the corresponding period last year. 

What are the implications of the trade data?

The trade data comes as a setback as the country was expecting that exports would help reverse a part of the industrial slowdown, which has resulted in job losses and factory shutdowns with a downward movement due to demand going down.

What are the immediate issues that worry exporters?

  1. Domestic issues including access to credit,
  2. Cost of credit,
  3. Interest equalization support to all agri-exports and 
  4. Quick refund of GST.

What is Interest Equalisation Scheme (IES)?

Avail of pre- and post-shipment credit at lower rates is done through the Interest Equalisation Scheme (IES).

What was the government’s response to the poor trade data?

Government came out with a stimulus package for exports. Highlights are:

  1. Setting up of the Scheme for Remission of Duties or Taxes on Export Product (RoDTEP) that will reimburse taxes, duties and cess on petroleum products and electricity and other non-GST levies that are embedded in the value of the export. 
  2. Fully electronic refund module for the quick and automated refund of input tax credits that will become operational by the end of September.
  3. To increase bank credit to exporters, the Export Credit Guarantee Corporation (ECGC) will expand the scope of its Export Credit Insurance Scheme to provide a higher insurance cover to banks that are lending working capital for exports.
  4. Simultaneously, the Reserve Bank of India is also looking into modifying the priority sector lending norms for the export sector to release an additional ₹36,000 crore to ₹68,000 crore as export credit.
  5. Apart from providing credit and incentives to exporters, the reforms package also included ways to make the sector more efficient and globally competitive. The entire process of export clearances will be digitised and all offline or manual processes will be eliminated to reduce the ‘time to export’. Further, an action plan to reduce the time to export and turn-around time in airports and ports benchmarked to international standards will be implemented by December 2019. The actual turnaround times will be published in real time for each port and airport and an inter-ministerial group will be made accountable for this.
  6. Increasing the testing and certification infrastructure in India