India’s merchandise exports contracted 1.15% year-on-year in August to $33 billion, while inelastic imports of petroleum and coal continued to climb, lifting imports above the $60 billion mark for the sixth successive month.
The country’s goods trade deficit moderated slightly sequentially from the record $30 billion in July, but remained the second highest on record at $28.68 billion, and widened appreciably from the $11.7 billion in August 2021. Preliminary trade data for July had also shown a 0.8% dip in exports, which was later revised to a 2.1% uptick. The last time India recorded a contraction in exports was in February 2021.
Apart from global headwinds, Commerce Secretary B. V. R. Subrahmanyam attributed the dip in outbound shipments, which declined 9% sequentially, to a growing tendency among international buyers to seek deferrals in shipments of confirmed orders, as well as the gamut of measures taken by the government to try and curb elevated inflation.
“There is some concern about Christmas orders,” Mr. Subrahmanyam observed. “Exporters’ order books are full but there are cases where buyers are asking for shipments not to be despatched,” he said, adding that restrictions akin to ‘almost’ being on a negative list for exports on items like wheat, steel and iron pellets to check inflation, had also impacted foreign trade.
While goods exports have averaged $38.5 billion a month between April and August, adding up to $192.5 billion, Mr. Subrahmanyam forecast India’s total outbound shipments in 2022-23 would touch $470 billion, or at least $450 billion in a ‘worst case scenario’. To achieve that, exports need to average between $36.8 billion and $39.6 billion over the next seven months.
Hinting that the government was working on a major package to spur exports, which was likely to be unveiled in the coming weeks, he said: “We would like the trend of flat exports to change, and measures will be taken to boost exports. India will also unveil a new Foreign Trade Policy on September 30 that should provide a fillip to exports.”
Coal and petroleum imports were driving the rise in imports but the overall rise in inbound shipments was also a sign of healthy demand in the economy as 25% of India’s imports were for consumer items, the Commerce Secretary said.
“The import surge reflects the strong demand of the domestic economy due to robust growth and strong fundamentals of the Indian economy. In value terms, the surge in imports is due to a combination of quantity and price factors,” the Commerce and Industry Ministry said.
While the goods trade deficit is now about $125 billion for the April-August period, Mr. Subrahmanyam said the overall trade deficit, factoring in about $300 billion of services exports in 2022-23, was likely to be $160-180 billion.
“With remittances at $90 billion, we expect the current account deficit to be in the range of 3% of GDP, which isn’t bad but something we need to be careful about. But the current primary concern is inflation and measures to cool price rise will result in some challenges on exports and imports front," he asserted.
Gold imports dropped 47% to $3.5 billion in August, from $6.7 billion a year earlier, and were 12.8% lower over the first five months of this fiscal, reflecting the fact that the import duty increases levied by the Centre after a sharp spurt in imports were working, officials said.
“The non-oil deficit accounted for nearly 60% of the total trade deficit in August, even though gold imports halved,” noted Aditi Nayar, chief economist at rating firm ICRA. “The year-on-year dip in exports, led by sectors such as engineering goods, gems and jewellery and yarns and textiles, suggests a cautious outlook for external demand going ahead,” she cautioned.
