Why in news?
Official trade data for April, 2020 was the grimmest in over two decades.
What does the data reveal?
- Merchandise exports had collapsed by over 60% and imports contracted only slightly less.
- Only two of India’s 30 biggest export products clocked positive growth - iron ore and pharmaceuticals.
- In an employment-intensive sector such as textiles, garment exports, which fell 16% between January and March, fell 91% in April.
- Due to the sharp dip in global oil prices, higher volumes of petroleum exports didn’t help much in value terms.
- The trade collapse was not surprising as the spate of national lockdowns around the world have,
- Dented demand and investment, and
- Severely disrupted global supply chains and shipping routes.
- India’s exports, however, were already in a free fall.
Did the government provide any relief to exporters?
- The government’s economic stimulus package in totality offered several reform commitments.
- It offered improvements in the ease of doing business along with some forbearance and sops for micro, small and medium enterprises (many of which are also export-oriented units).
- However, there was no explicit relief offered for exporters.
What were the RBI’s relief measures?
- On May 22, the Reserve Bank of India (RBI) did unveil a few measures.
- A special liquidity facility of Rs. 15,000 crore was provided for the Exim Bank of India.
- For importers, a six-month extension was given to complete outward remittances.
- For exporters, the maximum permissible credit period from banks was extended from 12 months to 15 months, for disbursements made up to July 31, 2020.
- This three-month credit extension for exporters was not a new measure and had already been announced by the RBI on March 23, 2020.
- Its repackaging two months later as a fresh move suggests policy makers are running short of ideas to prop up the export sector.
How will the trade data be for May 2020?
- The trade outcome for May is unlikely to be any better.
- The World Trade Organization expects trade flows to slip by between 13% and 32% over 2020.
- The forecast gets even murkier when one adds to this,
- The new barriers on trade in medical and food supplies imposed by over 90 countries, and
- An increasing tendency to look inward for essential supplies.
What needs to be done?
- India is again pitching to become an alternative investment destination for big global businesses.
- This is in the hope that the COVID-19 pandemic would prompt the global businesses to hedge their China-dependent supply chains.
- However, investment moves are a longer-term play.
- Meanwhile, bigger stimulus packages, announced by other countries, kick in to revive demand and give a minor fillip to international trade.
- Indian exporters should not be caught on the back foot of these bigger stimulus packages.
Source: The Hindu
