MUMBAI, 15th JANUARY 2022 – The Ministry of Trade and Industry has recently released the country’s monthly merchandise export report. According to the report, in December 2021, India exported $37.29 billion worth of goods, reaching an all-time high monthly.
India hit a monthly high in exports as demand for petroleum and engineering products, jewelry and gemstones soared in December 2021. The country’s merchandise exports nearly hit $300 billion. dollars in April-December, up 48.85% year-over-year. and 26% from the same period in 2019, reaching three quarters of its annual export target of USD 400 billion in the first nine months of the 2021-22 financial year.
On January 3, 2022, Trade and Industry Minister Piyush Goyal relayed the following to reporters during a press briefing: “With $300 billion in the first nine months of 2021-22, we are on track to achieve our goal.”
According to the data presented, the top ten commodity groups, which account for 80% of India’s exports, recorded a 21% year-on-year growth. Engineering products, which account for 26% of total exports, increased by 37.27% compared to the 2020-21 financial year. Strong demand for engineering goods from major importers such as the United States, UAE and Europe has boosted Indian exports.
Exports of petroleum products were valued at $5.6 billion in December 2021, up 140.2% from December 2022. Exports of clean petroleum products such as diesel, gasoline, naphtha and jet fuel increased from 1.26 million in 2020 to 1.33 million b/d in 2021, with an observed increase in shipments to 1.56 mn b/d in December compared to 1.36 mn b/d in November.
Export shipments of dirty petroleum products, including bitumen and fuel oil, increased from 47,000 bpd in 2020 to 55,000 bpd in 2021, while noting an increase of 21,000 bpd in November to 25,000 bpd in December 2021. Singapore emerged among the top importers of petroleum products from India in 2021 with 114,000 bpd and 128,000 bpd respectively. This growth in petroleum product exports can be attributed to a sharp rise in the price of crude oil and petroleum goods and a recovery in demand for mobility.
Gemstones and jewellery, which account for 8% of India’s total exports, rose 15.8% year-on-year.
The growth mainly represents the market recovery from the Covid crisis in 2020, with companies still trying to reach pre-pandemic levels. According to Colin Shah, Chairman of the Gem and Jewelry Export Promotion Council of India (GJEPC), the jewelry market has benefited from the excess liquidity triggered by fiscal stimulus provided by central banks around the world. Thus, part of the growth in jewelry exports can be attributed to excess liquidity in the world. However, according to ThePrint, gold jewelery is still seeing a drop in exports due to the “gloom” in markets like the Gulf. The United States also became one of the largest importers of Indian gemstones and jewelry in FY 2021-22, and its Indian diamond market also continues to grow steadily.
India recorded imports of goods worth USD 59.27 billion in December 2021, an increase of 38.06% over the same period in 2020. This growth was mainly driven by imports of goods. gold, crude oil and electronic products. In 2021, India spent a new record of USD 55.7 billion on gold imports by purchasing 1050 tons of gold, more than double the volume of 430 tons purchased in 2020. A fall in prices, favorable to retail buyers and restrained demand emerging in 2021 due to weddings postponed to 2021 due to the pandemic, is responsible for the sharp rise in gold imports. According to Nomura, gold imports may also have gained momentum in November-December 2021 due to consumers using the precious metal to hedge against rising inflation.
It should be noted that this surge in gold imports put downward pressure on the Indian Rupee.
Like gold imports, crude oil imports increased by 65.17%, valued at USD 15.9 billion in December 2021. This contrasts sharply with the significant decline in crude imports and the negative demand for oil in 2020 due to pandemic-related lockdowns. In response to the 100% increase in average operating rates across all Indian refineries in 2021, refiners have started buying crude oil rapidly, having forecast a sustained increase in product demand as the slightest Covid restriction boosted demand for transportation fuels such as gasoline to pre-pandemic levels, thus explaining the surge in crude imports. Additionally, $6.5 billion in electronic imports were reported in December 2021, an increase of 29.7% over the previous year.
Preliminary data pointed to a widening trade gap for India in December 2021 as import growth outpaced export growth. India’s trade deficit reached USD 21.99 billion in December 2021, a significant increase from the previous year’s trade deficit of USD 15.75 billion in December. According to Economic Times India, while the trade deficit in December 2021 showed an improvement in exports, imports in the coming months may continue to increase, increasing India’s current account deficit. Nomura economists expect higher global commodity prices, rising inflation and steady domestic demand to drive imports higher as India teeters on the brink of a third wave of recession. Covid. This could lead to a further worsening of India’s trade deficit.
While Minister Piyush Goyal revealed that they do not expect any immediate supply chain disruption due to the Omicron variant, Engineering and Export Promotion Council of India, Chairman Mahesh Desai argued that they remained cautiously optimistic that Omicron’s concern was real. This could play a significant spoilsport role as India’s major markets in North America and Europe are seeing very high numbers of infections, impacting the order pipeline. Although they have yet to see any impact, a clearer picture will be seen in the coming weeks. Furthermore, building trade resilience through regional integration has been a trend in 2021. Yet India finds itself divided between the urgent need to strengthen trade relations in a time of spreading regionalism and to act cautiously given the consequences of its previous trade agreements.
Considering both, India has negotiated with its trading countries to improve market access. Regarding free trade FTAs, the agreement with the United Arab Emirates is almost finalized and a provisional agreement with Australia, covering wide areas of interest, in particular labour-oriented sectors. works such as textile, pharmacy, footwear, leather products and agricultural products. A recent trade agreement has also been finalized with Mauritius. Other negotiations are underway for an India-EU trade agreement, an India-GCC trade agreement and bilateral trade agreements with Thailand and Israel.
These negotiations are part of India’s export growth strategy and are expected to improve the country’s trade balance in the years to come. However, India’s current trade balance is likely to deteriorate, with the trade deficit increasing in terms of billions of dollars and as a percentage of nominal GDP as its economy recovers and its trade balance shifts further in favor of the imports.
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The opinions expressed above are those of the author.
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