TRADE UPDATE #124

An Inflationary Spiral

16/07/2021

The supply chain bottlenecks, shortage of raw materials, higher shipping charges, pent-up demand from western markets, and the inability of businesses to restock inventories appear to be collectively surging inflation fears, claim experts. Since all these elements have already started feeding into price inflation, ultimately, the consumers will have to bear the brunt of the elevated costs. However, there is good news on the India front.

The country’s merchandise exports surged by 48% in June in comparison to last year, bringing the export number to US$ 32.5Bn. The commodities that recorded high year-on-year growth in June included petroleum (115%), man-made yarn, fabrics, and made-ups (82%), gems/jewelry (81%), meat, dairy/poultry products (62%), engineering goods (53%) and electronics (45%).

Moreover, a major trade deal on the horizon is the upcoming free trade agreement (FTA) with the European Union. After a hiatus of more than five years, the government is now all set to host the first few negotiation sessions before the end of the month. Keeping the importance of the deal in mind, a think tank has advised the government to mobilize within the commerce ministry, a special unit of representatives and officials who will act as trade negotiators henceforth. We hope that the policymakers recruit great talent to help India crack the toughest of deals.


ECONOMY

Exports jump 48% in June, imports surge 98%

Merchandise exports shrugged off the Covid impact to surge by 48% in June from a year before, while imports staged a smart rebound with a 98% jump, signalling a recovery in both external and internal demands even though the growth was aided by favourable base effect.


SHIPPING & LOGISTICS

Soaring shipping costs and goods shortages fuel inflation fears

Global supply chain bottlenecks have sent shipping costs soaring – on popular routes rates are up six-fold in the last year. Coupled with a shortage of raw materials that has pushed up prices, importers are raising the cost of goods to deal with these shocks, stoking fears of an inflationary spiral.


ECONOMY

Think tank recommends India to establish new trade negotiating body

As India prepares for renegotiations and new trade negotiations with complementary markets including the UK, US, and European Union, a think tank paper has recommended establishing a new body of experienced trade negotiators with a designated trade representative within the ministry of commerce.


MSMES

EXPLAINED: HOW MSMEs to drive growth; India to thrive as one of the leading economies in the world

It’s expected that India will thrive as one of the leading economies in the world over the next decade in light of a positive political and economic scenario. The Micro, Small & Medium Enterprises (MSME) segment has been playing a remarkable role in the emergence of the Indian economy. The development of MSME segment is extremely critical to fulfill the national mission of financial inclusion and generation of significant levels of employment across all geographical areas across the country.


COMMODITY

Indian rice export rates grind to 16-month lows as supplies grow

Indian rice export prices hit a nearly16-month low this week as new supplies come into market but demand remains low, while coronavirus restrictions in Vietnam undercut sales of the staple grain.


OTHER NEWS

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