India’s exports ride with US economic recovery despite Covid

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New Delhi, May 26: A handsome fiscal stimulus package in the US leading to its economic revival along with the containment of Covid 19 pandemic in Europe have given the much-required push to the Indian exports sector amid a severe Covid 19 second wave.

The US GDP rose by 6.4 per cent in the first three months of this year. Besides, several countries that have been dependent on China for imports of goods are now actively looking to diversify their markets.

While India’s exports in April almost trebled against the corresponding month in the previous year aided by a low base effect in the previous year, analysts said that there has been a significant rise in orders reflecting a “real recovery.”

US President Joe Biden just carved out a fiscal stimulus package of $2 trillion. Prior to that former US President Donald Trump had also injected a fiscal stimulus to boost the economy.

The US is one of India’s largest trading partners.

For exporters, while booking orders are in-tact the profit margins have dipped a little. Sources also said that there can be some hiccups in supply in the coming months as a few states such as Karnataka, Tamil Nadu and Andhra Pradesh are still in the grip of the pandemic.

“Profitability has taken a hit due to subdued prices for many goods. To ensure that it does not impact the exporters, it is important that they focus on volumes,” Ajay Sahai director general and chief executive of Federation of Indian Export Organisations (FIEO) told India Narrative.

“As of now export orders have not been dented. There has been no cause for worry as order booking has remained robust. Going ahead there could be some supply issues as a few states are still to peak but overall things are looking up with the US and Europe coming out of the Covid 19 pandemic,” Sahai added.

Engineering goods, gems and jewellery, pharmaceuticals among others are the main items that have been exported. India’s rice exports have also shown a huge jump.

DK Srivastava, EY’s chief policy adviser said that with vaccination drive picking up, India has “sufficient time” to make up for the lost ground.

Meanwhile, the overall number of new Covid infections have been on the decline which has come as a huge relief to policymakers amid a 10 per cent rise in foreign direct investments (FDI) inflows into the country during 2020-21. Total FDI was recorded at a record $81.72 billion in 2020-21 compared to 2019-20.

“The fact that FDI inflow has increased to this level goes on to show that the fundamentals of the economy have not been shaken despite the pandemic,” another analyst said.

(This content is being carried under an arrangement with indianarrative.com)

–indianarrative/