Trade Surplus in India ( USD 0.79 Billion) in June Indicates Promising Future

In June, India recorded a rare trade surplus, as aggregate exports inched up by USD 0.79 billion against total imports. The country has a revival in non-petroleum exports underpinned by growth in iron ore, cereals, chemicals, & pharmacy products exports. In a time of slowdown in the economic growth trajectory, this is a positive sign. With right policy impetus , Trade Surplus in India will continue to rise.

Trade surplus in India has been witnessed in June, backed by multidimensional policy pivots by the GOI and a recalibrating global supply chains. This might be the dawn of a new era, where India can consolidate its position as a key enabler of the global flow of trade and goods.

It has happened 1st time in 18 years. Overall imports shrunk by 47%. On the face of the COVID induced economic crisis, a contraction in export was inevitable. However, it has been narrowed down as numerous major categories registered substantial growth such as iron ore, chemicals, rice, cereals, pharmaceuticals, etc.

The nature of the trade surplus in India is multidimensional. Due to limited trade & retail activities, petroleum imports shrunk by over 55% in June, compared to a year before. Similarly, there was a tepid demand for gold & silver due to lesser marriages & public functions.

Petroleum exports declined by 31% in June. However, the silver line is the 10% reduction in imports, which has markedly improved from April, when it plummeted by 59.3%. This underscores a revival in export activities.

Potential to become a Manufacturing hub

The recent trade surplus in India has given a fresh breather to the economy despite the distress is visible in the economy. As activities are resuming and normalcy is restored, India is expected to play a bigger role in global trade flows going forward.

Following the supply shock during the lockdown, recovery is now seen across forward & backward linkages. Manufacturing activities have started to normalize and construction activities have commenced again. Despite the pandemic undermining the economic growth in the country, India is set to register a jump in agriculture produce on the back of the surge in monsoon, continuity of agriculture produce during the lockdown, and rural marketing reforms. The rural economy will bring in resilience and can help in a faster recovery.

Impetus to Boost Trade Surplus in India

The current trade surplus is marginal & is also rooted in factors such as a slowdown in demand for imports due to limited domestic activities. However, in the long run, India has the potential to post a larger trade surplus by upping its manufacturing and trade activities.

The rules of the games are in flux, and hence coordinated efforts by the central and state government agencies along with a push towards domestic manufacturing activities can strengthen the manufacturing sector and support export growth.

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