Merchandise exports fell to a six-month low and imports did their worst in 20 months — both in value terms — in April as sluggish demand for Indian goods due to an economic downturn in key destinations and easing commodity prices weighed on India’s trade basket.
The data released by the commerce department showed outbound shipments from India witnessed a sharp 12.7 per cent contraction at $34.66 billion during the first month of the fiscal year while those inbound saw a sharper decline at 14 per cent to $49.9 billion, leading to a 20-month-low trade deficit at $15.24 billion. This is the third and fourth consecutive month of a contraction in exports and imports, respectively.
Director General of Foreign Trade (DGFT) Santosh Kumar Sarangi said the demand scenario did not look “very optimistic” for the next two-three months though the situation was expected to improve September onwards.
Demand has not been good from the United States and Europe, some of India’s biggest export markets.
“Recession in some of the developed economies, as well as the lingering impact of the Russia-Ukraine conflict, is now making a very active impact and, combined with this, some cooling of commodity prices. Petroleum prices have been relatively cooling and the impact is visible both on imports and exports,” Sarangi told reporters on Monday.
While the value of goods exported has been slowing since July, the sharp decline in imports in April was mainly due to cooling commodity prices as well as reduced demand for items such as gems and jewellery.
Aditi Nayar, chief economist, ICRA, said the year-on-year decline in the merchandise trade deficit in April was driven primarily by non-oil items, with the fall in crude oil prices partly absorbed by higher volumes.
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On a sequential basis, the contraction in imports and exports in April was sharper at 17.2 per cent and 16.8 per cent, respectively.
Exports of non-petroleum products and non-gems and jewellery, also known as core exports, contracted 9.2 per cent in April to $25.76 billion. Their imports also declined to $31.49 billion, contracting 12.5 per cent.
Rajani Sinha, chief economist at Care Ratings, said given the weak global growth outlook, she expected overall merchandise exports to contract by 5 per cent in FY24.
“However, what is worrisome is that non-oil and non-gold imports, which are a reflection of domestic demand, have contracted on a y-o-y basis for the fourth consecutive month. The trade deficit is expected to narrow further, and we expect the current account deficit to reduce to 1.6 per cent of GDP in FY24 from an estimated 2.1 per cent in FY23.
India’s merchandise exports witnessed a contraction in 19 out of 30 sectors in April. Key export items that dipped in April include petroleum products (-17.62 per cent), plastics and linoleum (-18.95 per cent), gems and jewellery (-30 per cent), engineering goods (-7.15 per cent), and cotton yarn (-23.42 per cent). Among sectors that experienced positive growth include electronic goods (26.49 per cent) and drug and pharmaceuticals (10.45 per cent).
Merchandise imports contracted in 23 out of 30 items including coal (-28.5 per cent), crude petroleum (-13.95 per cent), chemicals (-31.4 per cent), precious stones (-18.7 per cent), transport equipment (-14.9 per cent), electronic goods (-5.7 per cent), and gold (-41.5 per cent).
The United Nations Conference on Trade and Development in its latest Trade and Development Report update said world trade was facing several headwinds and that weaker economic activities globally would inevitably result in feebler external demand, and thus subdued international trade.
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