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. There are two reasons for the same. First is the fall in oil prices between last year and now. The price of Indian basket of crude oil between April and July 2019, averaged at around $66.8 per barrel. The average price this year has been around half of the 2019 figure at $33.6 per barrel. 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. But exports have crashed at a softer pace than imports. In fact, if we look at non-oil and non-oil products exports, the fall is even lower at 25.8% to $68.4 billion.

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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”.

Which countries does India trade more with?

There are many countries India actively trades with. Take the case of China. Exports to the country during the June went up by 77.8% to $2.1 billion. Along similar lines, the exports to Singapore, Malaysia and Vietnam, during the month, went up by 34.6%, 74.7% and 42.7%, respectively. The reason is that these countries have managed to flatten the covid-19 curve. In contrast, exports to countries like the US and Brazil, which continue to see a rise in their covid caseload, are lower than where they were last year.

What’s the learning from this trend?

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.

Vivek Kaul is the author of Bad Money.