Important countries for Indian imports (in value terms) include China, UAE, US, Saudi Arabia and Russia. Considering the period 1QFY20 to 1QFY23, the shares of imports from China and the US have fallen while those of UAE, Saudi Arabi and notably Russia have increased largely reflecting changing patterns of sourcing global crude. In terms of major imported commodities, the shares of machinery and electronics and conventional commodities such as pearls etc. have fallen. On the other hand, the share of mineral products including oil and coal has increased significantly.
With respect to destination of exports, important countries for India are US, UAE, China and Indonesia among others. Considering the period 1QFY20 to 1QFY23, export shares to the US and Indonesia have increased while those to UAE and China have fallen. In the case of mineral (including refined petroleum) products, the share of exports has increased noticeably primarily because of India being able to charge high prices for its exports of refined petroleum products. There has been a fall in the share of the relatively more traditional items such as chemicals, textiles and pearls etc. (See in-focus section of the September 2022 issue of EY Economy Watch).
In the case of services exports, during the period 1QFY20 to 1QFY23, the highest share was that of computer services followed by professional and management consulting services. In the case of services imports, the highest share pertains to the group called ‘technical, trade-related and other business services’ followed by transport services, whose share has been increasing in recent years. Reflecting the continued impact of COVID, the export and import shares of personal travel remain significantly below their pre-COVID levels.
Major upheavals are also occurring in capital flows affecting India’s current and capital account balances which in turn impact domestic inflation and current account sustainability. Chart 2 provides a relatively long-term perspective on the movement of current account balance and that of net private transfers (remittances). Most years show a deficit on the current account while there have been only four years characterized by a surplus. The long period average of current account balance as a percentage of GDP over the period FY91 to FY22 is (-)1.2%. There is a noticeable correlation between global crude prices and the size of India’s current account deficit. With a minimization of exposure to crude price volatility, the volatility of current account deficit may also be contained.