Trade deficit normalises to pre-Covid levels: Report

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SME Times News Bureau | 21 Mar, 2021
Positive annualised growth in exports and imports for three straight months has taken India's trade deficit figures to pre-Covid levels, Acuite Ratings & Research said.

In its report on the February Trade Balance, the ratings agency said that bulk of normalisation is likely to have been driven by the sharp increase in global commodity prices, especially in the last 4-5 months.

"Going forward, as activity levels pick up further, the widening of India's trade deficit would get reinforced," it said.

India's merchandise trade deficit has eased to $12.6 billion in February 2021 from $14.5 billion in January but printed higher than $10.2 billion posted during the corresponding period of last year.

"The sequential moderation in merchandise trade deficit in Feb-21 was accompanied by a marginal increase in exports along with a marginal decline in imports vis-a-vis the previous month,".

"This appears to be in line with the usual seasonal trend."

Earlier, official data showed a rise in India's February merchandise exports to $27.93 billion from $27.45 billion in January and $27.74 billion reported for the corresponding period of 2020.

"This happens to be a 21-month high print on outbound shipments."

In terms of imports, India's inbound shipments in February 2021 increased by 6.96 per cent to $40.54 billion from $37.90 billion during the corresponding period of 2020.

On a sequential basis, they stood lower than January's import bill of $41.99 billion.

"The relatively higher growth in imports in the last 3-months also signals that incrementally India's domestic demand is on the path of recovery, with support from favorable statistical base effect and accommodative monetary and fiscal policies."

In the near term, the report cited some minor disruption to external trade can be expected on account of the fresh wave in Covid infections, globally as well as in India.

On a sequential basis, they stood lower than January's import bill of $41.99 billion.

"The relatively higher growth in imports in the last 3-months also signals that incrementally India's domestic demand is on the path of recovery, with support from favourable statistical base effect and accommodative monetary and fiscal policies."

In the near term, the report cited some minor disruption to external trade can be expected on account of the fresh wave in Covid infections, globally as well as in India.

"However, the impact is likely to be limited as the same could get offset with ongoing rapid progress in vaccination in several countries -- in just about 3 months, nearly 2.8 per cent of the world population has received at least one dose of Covid vaccine."