India’s merchandise exports contracted in November after growing at their fastest pace in 11 months in October, pointing to volatile global demand and an uneven economic recovery.
According to data released by the Commerce Department on Friday, exports fell 2.8 percent year-on-year to $33.9 billion in November, while imports fell 4.3 percent to 54.5 billion dollars, leading to a reduction in the trade deficit to $20.6 billion.
The deficit widened to a record $31.5 billion in October as festival-related demand led to a sharp rise in gold and silver imports.
Commerce Secretary Sunil Barthwal said the green shoots of exports had stabilized and the overall trend was positive in November. “Global trade is suffering, but we are still able to hold the fort. Commerce is not a one-way traffic. It needs to be looked at in the global context. We have looked at GDP growth rates in many countries and they are not high. We also looked at the evolution of interest rates and they have not fallen despite the slowdown and global conflicts (in Eastern Europe and West Asia),” he added.
In terms of value, except for August, overseas shipments from India have remained in the range of $33 billion to $34 billion since April this year, significantly lower than that of April to November last year.
Exports contracted 7 percent to $278.8 billion in the April-November period, while imports fell 9.5 percent to $445.1 billion.
Federation of Indian Export Organizations (FIEO) President A Sakthivel attributed the drop in exports to growing uncertainties and slow global economic recovery. “The slowdown in commodity prices from the high levels of 2022 also contributed to this decline. Exports are showing a downward trend in almost all countries and many are experiencing double-digit declines. The war between Russia and Ukraine, as well as tensions in West Asia, have also increased the sense of skepticism and nervousness among businesses and markets around the world,” he said.
According to a report by the United Nations Conference on Trade and Development (UNCTAD), global exports of goods and services are expected to decline by 4.5% in 2023.
Aditi Nayar, chief economist at ICRA, said India’s merchandise trade deficit narrowed unexpectedly in November and a better-than-expected export performance led to a narrower deficit of $20 billion compared to ICRA’s forecast of $23.5 billion.
“For the remainder of this financial year, we forecast a monthly trade deficit of between $20 billion and $25 billion, which would result in a current account deficit of around 2.5 percent of GDP in the third quarter of FY24 and 1.7 percent of GDP in the fourth quarter of FY24. Overall, we forecast a current account deficit of between 1.7 and 1.8 percent of GDP in FY2024 ” said Nayar.
Non-oil and non-gems and jewelry exports, also known as core exports, contracted 2.8 percent in November to $24.3 billion.
Indian merchandise exports declined in 15 of 30 key sectors in November. The main export products that declined in November were petroleum products (-7.45 percent), engineering goods (-3.1 percent), ready-made garments (-14.92 percent) and organic and inorganic chemicals (-11.43 percent).
Among the key sectors that have seen positive growth are gems and jewelry (11.97 percent), medicines and pharmaceuticals (7.33 percent) and electronic products (1.09 percent).
Merchandise imports also declined in 15 of 30 sectors, including coal (-10.39 percent), crude oil (-8.47 percent) and precious stones (-56.71 percent).
Services exports grew 6.5 percent to $28.7 billion in November while services imports declined 12.9 percent to $13.4 billion, resulting in a surplus of 15 .3 billion dollars. The services trade data for November, however, constitutes an “estimate”, which will be revised based on the subsequent release of the Reserve Bank of India.
First publication: December 15, 2023 | 9:32 p.m. STI
