The global slowdown has begun to hit home, denting India’s goods exports by 16.65% in October compared to a year ago — the first contraction since February 2021 that dragged outbound shipments below $30 billion for the first time in 20 months.
Imports grew 5.7% year-on-year to $56.7 billion, which marked the lowest merchandise import bill in eight months, possibly due to softening commodity prices.
The trade deficit for the month surged 50.25% to $26.91 billion, as per data released by the Commerce Ministry on Tuesday. October’s deficit was about 4.7% higher than September 2022 and was the fourth successive month of an over $25 billion gap between goods imports and exports.
The decline in exports was broad-based across sectors with just a handful of segments reporting an uptick in shipments, including electronic goods which grew almost 38% to $1.8 billion
Engineering goods, a mainstay of India’s exports in recent years, dropped over 21% to $7.4 billion, with the Ministry stating that the $2 billion drop ‘includes steel and its products’, signalling that the export tax on iron and steel is hurting these exports.
Exports from major job-intensive sectors such as readymade garments and gems and jewellery dropped over 21%, while cotton yarn, handlooms and handicraft products nearly halved from a year ago.
Commerce Secretary Sunil Barthwal said the October trade data was impacted by Diwali, Dussehra festive period as factory workers tend to go on leave and production drops. “Over the last two years, I have seen there is a $4 billion gap in the trade between the pre-Diwali and the Diwali period, as exports drop and demand for imports rises,” he said.
“This is a seasonal blip… We will assess whether this is a trend that will persist after looking at how November trade numbers turn out…” he said, stressing there is no need to be ‘overly depressed’ about the gloomy global trade forecast from WTO of just 1% growth in world trade in 2023.
“The pinch from slowing external demand is going to get more painful for Indian economy in the months to come. We could see a significant portion of India’s GDP shaved by widening of trade deficit in the subsequent quarters,” cautioned CARE Ratings chief economist Rajani Sinha. The sharp 17% contraction in core exports, defined as non-oil, non-gems and jewellery exports, is a cause of concern, she added.