India’s trade economy is slowly showing signs of normalisation, along with other economic indicators which suggest the first-order impact of the Covid-19 crisis is wearing off.

While headline export growth remains below pre-Covid levels, the fine print of recent trade data shows that non-oil, non-gold exports, including labour-intensive exports are starting to recover. The latter category has a bearing on a wide range of small businesses who export items like gems and jewellery, leather goods and textiles among others.

In November, India’s exports of labour-intensive items grew for the first time in at least a year. Labour-intensive exports grew by 2.1% in November to $5.2 billion, according to data from the Ministry of Commerce compiled by BloombergQuint. For the analysis, gems and jewellery, textiles, handloom products, leather, handicraft and carpets were classified as labour-intensive industries.

The categories made up over 22.09% of total merchandise exports in November 2020, compared to 19.75% in November last year, the data showed.

Gems and jewellery, which accounts for over half of all labour-intensive exports, grew by 4.1% to $2.7 billion in November 2020.

Ready-made garment exports fell 1.2%, while handloom product shipments rose 8.5%.

Growth in textile exports was at the same level as a year ago, while leather shipments lagged.

Momentum In Non-Oil Exports

The reversal in labour-intensive exports was accompanied by a normalisation of broader non-oil trade.

Non-oil exports remained flat in November, compared to a contraction of 8.74% in overall merchandise exports. In October, non-oil exports had risen by 1.98% compared to a contraction of 5.12% in exports. Excluding oil, gems and jewellery, exports shrank 0.4% on an annual basis in November, compared to a contraction of 6.51% in October.

According to a research note by Export-Import Bank of India, non-oil exports for the ongoing quarter are estimated at $68.3 billion, witnessing a marginal positive growth of 0.3%, compared to a contraction of 1.8% to $77.6 billion in total merchandise exports.

The trade deficit is now normalising as non-oil non-gold exports and imports both remained unchanged annually, said Neelkanth Mishra, co-head of equity strategy, Asia-Pacific at Credit Suisse.

Broader export and import recovery, however, remains subject to the outlook for fuel demand and prices.

Recovery in petroleum imports and exports, India’s largest traded commodity, is subject to volume and price, said Sameer Narang, chief economist at Bank of Baroda. While crude prices are recovering, recovery in volumes remains to be seen over the coming months, he said. “Demand for diesel, for instance, remains below pre-Covid levels with large consumers such as the railways yet to return to pre-Covid scale of operations.”



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