Merchandise exports affected by global slowdown but not export of services

Merchandise exports affected by global slowdown but not export of services


Is it the case that global economic downturn instead of shrinking domestic demand has affected our economy more? If the aforesaid statement is true, then ideally the trade related data should indicate improvement in our imports and deceleration in the country's exports. However, that is not the case and we get a mixed picture.  

A press release by the Ministry of Commerce & Industry dated 13th September, 2019 shows that the country's overall export of 'merchandise' (viz. goods and commodities) and 'services' (such as transport, insurance, financial services etc.) increased by 3.20 percent in April-August 2019-20 over the corresponding period last financial year to arrive at US$ 227.36 billion. As against that, our total imports comprising 'merchandise' and 'services' declined by -1.18 percent in April-August 2019-20 over the same period last financial year to attain US$ 268.24 billion. Kindly, consult chart-1 for details.

Although export of 'merchandise' contracted by -1.53 percent in April-August 2019-20 (over the corresponding period last financial year), export of 'services' expanded by 10.78 percent. Similarly, import of 'merchandise' shrank by -5.68 percent in April-August 2019-20 (over the corresponding period last financial year) as opposed to import of 'services', which grew by 17.54 percent. Thus, trade data pertaining to 'merchandise' and 'services' indicate contradictory trends for the period April-August 2019-20.

It may be noted that many of the goods, which we import, are also re-exported after adding value to them. For example, gems and precious stones are imported first and after they are transformed into jewellery (viz. following value addition), are then re-exported.

Chart 1: Performance of trade in 'merchandise' and 'services' (in US$ billion) during April-August 2019-20 and their year-on-year growth (in percent)

Chart 1 Performance of trade in merchandise and services during April-August 2019-20
Source:
Press release: India's Foreign Trade in August 2019, released on 13th September, 2019, Ministry of Commerce and Industry, please click here to access

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The press release dated 13th September, 2019 also indicates that the major commodity groups whose export exhibited positive growth in August 2019 over the corresponding month of last year are Iron Ore; Electronic Goods; Spices; Marine Products; and Mica, Coal & Other Ores, Minerals including processed minerals.  

The major commodity groups whose import demonstrated negative growth in August this year over the corresponding month of previous year are Coal, Coke & Briquettes, etc.; Organic & Inorganic Chemicals; Petroleum, Crude & products; Machinery, electrical & non-electrical; and Electronic goods.   

Please note that oil imports during April-August 2019-20 were US$ 55.33 billion as compared to US$ 59.07 billion during the same period last year, which is fall by -6.33 percent. This has happened despite a decrease in global Brent prices in recent months. A recent news alert by Inclusive Media for Change (dated 5th September, 2019) shows that for 7 consecutive months (beginning from February 2019) the registration of vehicles in the country recorded negative growth rates (on a year-on-year basis).

Chart 2 Month wise overall export of merchandise and services in US dollar million in various years and their growth on a year on year basis in percent
Source: Monthly Bulletin on Foreign Trade Statistics released on 13th September 2019 (Analysis based on data up to July 2019), Directorate General of Foreign Trade, Ministry of Commerce and Industry (based on figures from Directorate General of Commercial Intelligence and Statistics, Kolkata and Reserve Bank of India), please click here to access
Note: Please click here to access the data from chart-2 in a tabular format
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On consulting the Monthly Bulletin on Foreign Trade Statistics released on 13th September 2019 by the Directorate General of Foreign Trade, it could be observed that although overall export of 'merchandise' and 'services' grew positively on a year-on-year basis from April 2017-18 to May 2019-20, it plummeted by -1.06 percent in June 2019-20. Please check chart-2.

Chart 3 Month wise overall import of merchandise and services in US dollar million in various years and their growth on a year on year basis in percent
Source: Monthly Bulletin on Foreign Trade Statistics released on 13th September 2019 (Analysis based on data up to July 2019), Directorate General of Foreign Trade, Ministry of Commerce and Industry (based on figures from Directorate General of Commercial Intelligence and Statistics, Kolkata and Reserve Bank of India), please click here to access
Note: Please click here to access the data from chart-3 in a tabular format
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Overall imports comprising 'merchandise' and 'services' displayed positive growth on a year-on-year basis from April 2017-18 to January 2018-19. However, overall imports dropped by -4.29 percent in February 2018-19 and by -5.55 percent in June 2019-20. Please see chart-3.

Table 1: Quarterly estimates of expenditures of GDP in Q1 (April-June) of 2019-20 (at 2011-12 prices)

Table 1 Quarterly Estimates of Expenditures of GDP in Q1 April-June of 2019-20 at 2011-12 prices
Source: Press Note on Estimates of Gross Domestic Product for the First Quarter (April-June) 2019-20, released on 30th August, 2019, Ministry of Statistics and Programme Implementation (MoSPI), please click here to access
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Table-1 shows that 'private final consumption expenditure' and 'government final consumption expenditure' together constituted almost two-third of the country’s entire gross domestic product viz. GDP (at 2011-12 prices) in the period April-June, 2019-20. However, nearly one-fifth of India’s GDP (at constant prices) came from exports (of ‘merchandise’ and ‘services’) during the same period.

We also find that the proportion of exports in GDP (at 2011-12 prices) increased marginally from 20.4 percent to 20.6 percent between the first quarter of 2018-19 and first quarter of the current financial year. On the contrary, the proportion of imports in GDP (at constant prices) reduced slightly from 25.3 percent to 25.1 percent between the first quarter of 2018-19 and the first quarter of 2019-20.
 

References


Press release: India's Foreign Trade in August 2019, released on 13th September, 2019, Ministry of Commerce and Industry, please click here to access

Monthly Bulletin on Foreign Trade Statistics released on 13th September 2019 (Analysis based on data up to July 2019), Directorate General of Foreign Trade, Ministry of Commerce and Industry, please click here to access

Press Note on Estimates of Gross Domestic Product for the First Quarter (April-June) 2019-20, released on 30th August, 2019, Ministry of Statistics and Programme Implementation (MoSPI), please click here to access

Monthly Bulletin on Foreign Trade Statistics, Directorate General of Foreign Trade, various months, https://dgft.gov.in/bulletin-statis-report

Trade Data & Statistics, Directorate General of Foreign Trade,
https://dgft.gov.in/more/data-statistics

Adopt a green growth strategy to boost the sluggish automobile sector, News alert by Inclusive Media for Change dated 5th September, 2019, please click here to access 

India should rid its trade policy of outdated priorities -Manoj Pant, Livemint.com, 11 September, 2019, please click here to access 


Image Courtesy: Inclusive Media for Change/ Shambhu Ghatak




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