India’s trade deficit retreats to pre-COVID levels, claims report

Positive annualised growth in exports and imports for three straight months has taken India’s trade deficit figures to pre-Covid levels, Acuite Ratings & Research said.

In its report on the February Trade Balance, the ratings agency said that bulk of normalisation is likely to have been driven by the sharp increase in global commodity prices, especially in the last 4-5 months.

“Going forward, as activity levels pick up further, the widening of India’s trade deficit would get reinforced,” it said.

India’s merchandise trade deficit has eased to $12.6 billion in February 2021 from $14.5 billion in January but printed higher than $10.2 billion posted during the corresponding period of last year.

“The sequential moderation in merchandise trade deficit in Feb-21 was accompanied by a marginal increase in exports along with a marginal decline in imports vis-a-vis the previous month”.

“This appears to be in line with the usual seasonal trend.”

Earlier, official data showed a rise in India’s February merchandise exports to $27.93 billion from $27.45 billion in January and $27.74 billion reported for the corresponding period of 2020.

“This happens to be a 21-month high print on outbound shipments.” In terms of imports, India’s inbound shipments in February 2021 increased by 6.96 per cent to $40.54 billion from $37.90 billion during the corresponding period of 2020.

On a sequential basis, they stood lower than January’s import bill of $41.99 billion.

“The relatively higher growth in imports in the last 3-months also signals that incrementally India’s domestic demand is on the path of recovery, with support from favorable statistical base effect and accommodative monetary and fiscal policies.”

In the near term, the report cited some minor disruption to external trade can be expected on account of the fresh wave in Covid infections, globally as well as in India.

On a sequential basis, they stood lower than January’s import bill of $41.99 billion.

“The relatively higher growth in imports in the last 3-months also signals that incrementally India’s domestic demand is on the path of recovery, with support from favourable statistical base effect and accommodative monetary and fiscal policies.”

In the near term, the report cited some minor disruption to external trade can be expected on account of the fresh wave in Covid infections, globally as well as in India.

“However, the impact is likely to be limited as the same could get offset with ongoing rapid progress in vaccination in several countries -- in just about 3 months, nearly 2.8 per cent of the world population has received at least one dose of Covid vaccine.”

Meanwhile as online shopping sees more adoption, the third-party logistics (3PL) shipments grew 70 per cent in the month of October-December 2020, contributing 45 per cent of the shipment volume for the e-tailing industry, a new report said on Monday.

The 3PL shipped 750 million, which was a growth of 450 million from the period of July-September2020.

“The 3PL has tremendous headroom to grow in eGrocery and foodtech as it completes merely 10 per cent and 5 per cent in those respective sectors,” according to Bengaluru-based market intelligence firm RedSeer.

While 3PL has grown from 107 million shipments in July-September period in 2020, it has only grown by two million in the eGrocery space during the same period, which shows that it has a long way ahead.

Online retail in India has grown more than 3 times in the last four years and is only set to be bigger in the coming years.

“As customers become more aware and comfortable with online shopping, delivery experience will become a key parameter to retain and onboard customers, hence this report unveils some invaluable insights on this competitive market,” the report noted.

Platforms such as Xiaomi, Decathlon and Dunzo came out as frontrunners in their respective sectors in terms of high delivery experience satisfaction.

While Captive logistics have taken prominence, third-party logistics (3PL) now also plays a key role.

“However, the role of 3PL players differ from one vertical to another. While it contributes highly for digitally native brands (DNB) and other emerging brands, it is still low in the e-grocery and foodtech space,” the findings showed.

Owing to smaller scale, there is a definite need for partnerships with third party logistics platforms for last-mile fulfilment and with emergence of ‘delivery’ as a key factor for driving customer satisfaction, “it is imperative for these brands/platforms to provide best of the class delivery experience to drive the overall customer satisfaction”.