India’s merchandise exports contracted 1.15% in August to $33 billion, while inelastic imports of petroleum and coal remained firm, lifting imports above the $60 billion mark for the sixth successive month.
The country’s goods trade deficit moderated slightly from the record $30 billion in July, but remained the second highest on record at $28.68 billion, more than double the $11.7 billion in August 2021. Preliminary trade data for July had also showed 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 fall in outbound shipments, whose value also dipped 9% over July 2022 levels, to a growing tendency among global buyers to seek deferrals in shipments of orders already placed as well as the bevy of measures taken by the government to curb elevated inflation.
“There is some concern about Christmas orders. 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, have 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 said 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 is working on a major package to spur exports in 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 are driving the rise in imports but the overall rise in imports is also a sign of healthy demand in the economy as 25% of India’s imports are 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 around $125 billion between April and August, Mr. Subrahmanyam said the overall trade deficit, factoring in about $300 billion of services exports in 2022-23, is 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 ago and are 12.84% down between April and August 2022, reflecting that the import duty hikes levied by the Centre after a sharp spurt in imports are 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 warned.
