India’s foreign trade data for the first eight months of 2022-23 has been significantly revised, with the import bill being scaled up or down by at least $2 billion in each of those months, in comparison to the preliminary estimates issued by the Ministry of Commerce.
Total merchandise exports between April and November are now pegged at $298.3 billion, nearly $12 billion higher than original monthly data suggested. The import bill in those eight months is now estimated to be $493.5 billion, about $1.7 billion higher than initial numbers. The trade deficit in the first eight months of the year is $10 billion lower than indicated by adding up monthly preliminary estimates.
Economists said that such wide variations in data are unusual and make it difficult to formulate appropriate policies, especially when a critical focus area for the economy is managing the widening current account deficit, fuelled by rising imports and a feared slowdown in exports amid a global recession.
Worst deficit in September
The import figure for September 2022 has seen the sharpest revision, from an earlier estimate of just $61.1 billion to the year’s highest tally at $64.7 billion. September now marks the worst monthly trade deficit of $29.23 billion for India.
As per earlier data, July 2022 was reckoned to have the worst goods trade deficit on record of $30 billion, but its import bill has been subsequently scaled down sharply from $66.3 billion to a little short of $64 billion, while exports have been raised by $2.1 billion. Consequently, July’s deficit is now pegged at just $25.6 billion, which was in fact lower than the deficit recorded over the next three months.
October and August 2022 recorded the second and third highest monthly deficits in merchandise trade at $27.4 billion and $26.8 billion, with the import bill for these months being revised up by $2.3 billion and almost $2 billion, respectively.
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The steepest revision in export numbers has been made for August and November at $3.1 billion and $2.8 billion, respectively. As per preliminary estimates, exports in November had grown just 0.6% to $31.99 billion, but revised numbers signal a 9.6% year-on-year rise, with shipments worth $34.85 billion.
‘Policy making affected’
“The trade numbers influence the current account deficit trajectory. Policy making to address this must be evidence-based, but if the data is going haywire, and not by a small margin, we have a problem,” said noted trade economist Biswajit Dhar, who is a professor at the Centre for Economic Studies and Planning at the Jawaharlal Nehru University. “A $3.5 billion discrepancy in import estimates for a month is not a small thing,” he pointed out.
Queries about the trade data revisions mailed to the Commerce and Industry Ministry on Friday did not elicit a response till late Sunday evening.
In a report on November’s foreign trade data, rating firm ICRA also flagged the “large discrepancy between the monthly data on merchandise exports and the cumulative data for the same that accounts for revisions, both of which are released by the Ministry of Commerce and Industry”.
By November, the gap between preliminary export estimates for each month and the cumulative figure for the full year so far, stood at $8.6 billion, it said. This gap has now stretched to $11.6 billion after November’s exports were also revised higher.
The Reserve Bank of India (RBI), in an article on the state of the economy in its latest bulletin, has alluded to the corrections in trade numbers, while referring to the merchandise trade deficit reaching an all-time high of $83.5 billion and the current account deficit (CAD) rising to 4.4% of GDP in the second quarter (Q2) of 2022-23.
“It is noteworthy, however, that the CAD for Q1 was revised down from 2.8% to 2.2% on account of downward adjustment in customs data. Similar adjustments may impinge on the CAD for Q2:2022-23 as customs data or imports are revised,” the article said. Incidentally, revised goods trade estimates for July to September included in the same bulletin peg the deficit for the second quarter lower at $81.69 billion.
In its December bulletin, the central bank said that the net exports’ contribution to aggregate demand in Q2 was negative as imports grew faster. Net exports were “the highest drag on aggregate demand from the external side since Q4 of 2012-13”, it cautioned.
The RBI also noted that imports continued to decelerate and November’s $55.9 billion import bill marked “a ten-month low”. Subsequent data revisions put November’s imports at 58.2 billion, which was the lowest in seven months.