WEEKLY ANALYSIS

BY UDAY
ABSTRACT
The COVID-19 pandemic is inflicting high and
rising human costs worldwide, and the
necessary protection measures are severely
impacting economic activity. As a result of the
pandemic, India announced its first nation-
wide lockdown in March, which led to the
economic slowdown. Consequently, India’s
international trade took a huge hit as well.
The objective of this report is to analyze and
compare the trends of India’s imports and
exports in the wake of the current pandemic,
to determine the causes of disparities
WEEKLY
WEEK 1 ANALYSIS BY UDAY
between them as well as to suggest the way
forward.

IMPACT OF THE PANDEMIC ON Uday Arora

INDIA’S INTERNATIONAL TRADE M.A. Economics
(with specialisation in Trade & Finance)
Indian Institute of Foreign Trade
2019 - 2021
WEEKLY ANALYSIS BY UDAY

TABLE OF CONTENTS

NO. CONTENTS PAGE NUMBER

1. Overview 2

2. Trade Trend: Exports 3

3. Trade Trend: Imports 4

4. Exports v/s Imports 5

5. Conclusion & Way Forward 6

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WEEKLY ANALYSIS BY UDAY

OVERVIEW
The world is witnessing the carnage of the novel
coronavirus (COVID-19) pandemic. There has
been a significant loss of human lives and the
global economy has also felt the impact
severely. Global markets are in free fall with
supply-chain disruption and manufacturing
falling to the lowest levels in decades. Reduced
international trade, falling PMIs across the globe
and deep cuts in GDP forecasts for the year
indicate that we have entered the anticipated
recessionary period. With indices fluctuating
wildly and crude oil futures hitting negative
prices on the dollar, this is uncharted territory
for traders and policymakers alike.
The COVID-19 pandemic is inflicting high and
rising human costs worldwide, and the
necessary protection measures are severely
impacting economic activity. As a result of the
pandemic, India announced its first nation-wide
lockdown in March, which led to the economic
slowdown.
Consequently, India’s international trade took a
huge hit as well. This is shown as follows: -
• Between April and July, the goods imports
have fallen by 46.7% to $88.9 billion.

• In comparison, goods exports during the

same period have fallen at a much slower
pace of 30.3% to $74.9 billion.

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WEEKLY ANALYSIS BY UDAY

TRADE TREND: EXPORTS

In June 2020, India’s exports trailed their June 2019 numbers by 12%. In
July 2020, the gap to July 2019 was 10%.
On the face of it, these are not bad numbers for a segment that tumbled
60% in April and is trying to claw back lost ground.
But one caveat is called for: -
➢ India’s exports have had a difficult time in recent years. In 2019-20,
the year against which current performance is being benchmarked,
India’s exports fell 5%, shows data from India’s central bank.

Increase/Decrease in India's Exports in June 2020 (in %)

90
80 77.8
74.7
70
60
50
42.7
40 34.6
30
20
10
-6.3 -11.3
0
-10 China Malaysia Vietnam Singapore Brazil US
-20

➢ India’s exports to China, Singapore, Malaysia, and Vietnam went up

in June as these countries have managed to flatten the covid-19
curve.
➢ Exports to the US and Brazil, however, declined, as they continue to
see a rise in infections.
In July, there’s been positive growth in exports to north-east Asia
(including China and South Korea) and ASEAN countries (including
Malaysia, Singapore and Vietnam). By comparison, exports to North
America, European Union and West Asia have shrunk.
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WEEKLY ANALYSIS BY UDAY

TRADE TREND: IMPORTS

In June 2020, imported commodities such as gold, coal and petroleum
products faced more than 50 percent decline as compared to June 2019.
On the other hand, electronic goods were least affected.

Decrease in India's Imports in June 2020 (in %)

-34.05 Electronic goods

-42.02 Electrical & non-electrical machinery

-55.29 Crude petroleum & its products

-55.72 Coal, coke & briquettes

-77.42 Gold

-100 -80 -60 -40 -20 0

• Why have imports crashed by 46.7%?

A major reason for the overall decline in imports is the drop in oil and
oil products imports, which have plunged by a whopping 55.9% to
$19.6 billion. The lack of mobility due to the spread of the coronavirus
pandemic has led to the consumption of petroleum products coming
down by 22.50% between April and July.
• What else is behind the crash in imports?
Due to the spread of covid-19, incomes have been substantially hit,
causing consumption to fall. And this general lack of demand has
shown up in imports crashing. The non-oil, non-gold, non-silver
imports, —an excellent indicator of consumer demand—have fallen by
38.6% to. $66 billion. Along similar lines, a demand crash in other
countries dealing with COVID, has led to a decline in demand for goods
from India. This has led the exports to crash by 30.3% to $74.9 billion.

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WEEKLY ANALYSIS BY UDAY

EXPORTS V/S IMPORTS

A deceleration in goods imports at a time exports are rising faster
suggests that domestic demand in the country is recovering much more
slowly compared to other countries. A comparison of the resulting import
and export levels due to the pandemic is shown as follows: -

India's exports have done better than imports

in bouncing back to 2019 levels
• Why have imports fallen at a faster pace than exports?
India’s exports have declined at a slower pace simply because some of
India’s trading partners faced the COVID pandemic earlier than India
did, and their economies are gradually getting back on track. As the
rating agency CRISIL pointed out in a recent research note, there has
been a “rise in exports to economies which have been able to control
the pandemic”.
The recovery
in exports is
also more
broad-based
than the one
in imports.

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WEEKLY ANALYSIS BY UDAY

CONCLUSION & WAY FORWARD

India is again pitching to become an alternative investment destination

for big global businesses in the hope that the COVID-19 pandemic would
prompt them to hedge their China-dependent supply chains. But
investment moves are a longer-term play. Meanwhile, Indian exporters
shouldn’t be caught on the back foot as bigger stimulus packages,
announced by other countries, kick in to revive demand and give a minor
fillip to international trade.
India has swung to extremes during the pandemic. Data from the
Organisation for Economic Co-operation and Development (OECD) shows
that India suffered the second-largest monthly drop in exports in April,
the worst month of the pandemic. Subsequently, it was ranked third in
monthly increase in May and seventh in June. In other words, India’s
exports are recovering, but they are doing so on a low base, and
fundamental issues on how to become more competitive globally remain.
Becoming more competitive is a long-term task. In the near term, the
objective would be to at least revert to the old normal, and the recent
trade data suggests reasons for hope.
As CRISIL points out: “Export prospects for this fiscal will pivot on the
trajectory of the pandemic across countries. It will rise for countries that
have controlled their caseload and restarted activity. China is a case in
point. China entered and controlled the pandemic much earlier than other
economies. Its cases peaked in February, post which activities resumed.”
This is precisely how things will play out with other nations when it comes
to exports.
END OF REPORT
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