Tentative global demand pulled India’s goods exports down 8.8% in February to $33.9 billion, while imports fell 8.2% from a year ago to $51.31 billion, according to Commerce Ministry estimates released on Wednesday. This is the third time in five months that merchandise exports have contracted, following an 11.6% drop in October 2022 and a 3% fall in December 2022.
Outbound shipments’ value dropped for as many as 16 of India’s top 30 export items in February, with 14 of them recording close to or higher than double digit declines. This included a 9.7% dip in engineering exports, which have been a bulwark of India’s exports in recent years.
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The merchandise trade deficit during February 2023 fell 7% to $17.43 billion, slightly higher than January’s $16.56 billion deficit, which in turn was the lowest in at least 18 months. The first two months of 2023 have now clocked a sharply lower average deficit than seen through all of 2022, when the monthly deficit hit a record $29.23 billion in September.
Oil exports fall
“While both oil and non-oil exports contracted, oil exports fell sharply by 28.8%, while imports went below the $52 billion-mark, a level not seen for almost a year,” said CareEdge Ratings chief economist Rajani Sinha.
Although gold imports dropped almost 45% from February 2022 levels to $2.63 billion, this constituted a 277% month-on-month jump from January’s imports of the yellow metal.
For the first 11 months of 2022-23, India’s total goods exports now stand at $405.94 billion, 7.55% higher than in the same period of 2021-22. Imports have grown 18.82% over the same period to $653.47 billion from about $550 billion a year ago. Consequently, India’s goods trade deficit for this year is now 43.5% higher than in the first 11 months of 2021-22, at $247.53 billion.
‘Kept the momentum’
“Imports have been coming down month by month as has the trade deficit, which shows that efforts led by the Commerce and Industry Minister to bring down inessential imports are bearing fruit,” asserted Commerce Secretary Sunil Barthwal.
On the exports front, despite February’s contraction, India has “kept the momentum” and will “exceed the year’s target”, he said, referring to a $750 billion goalpost for goods and services exports in 2022-23.
Though the moderation in trade deficit is a positive, Ms. Sinha pointed out that this is mainly due to lower imports amid softening commodity prices. “In the months to come, import performance will remain crucial to gauge the pulse of domestic demand, even as the export slowdown is likely to aggravate further amid uncertain global scenario,” she reckoned.
While the government had initially estimated a 6.6% drop in exports for January, the month’s exports have now been revised upward by around $2.8 billion to $35.76 billion, reflecting a 1.5% rise from January 2022 levels. Import numbers for January have also been upgraded from $50.66 billion to $52.33 billion, 0.45% lower than a year ago.
On a sequential basis, February’s exports were 5.25% lower than January 2023 while the import bill was about 2% below the previous month’s level.
“Some employment-intensive sectors like textiles, plastics, linoleum and engineering have been impacted due to contraction in demand, with rising inflation and increasing recession in some of the markets. However, we expect them to recover in the next few months,” said Federation of Indian Exporters’ Organisations president A. Sakthivel.