India’s merchandise exports touched $34.5 billion in January, 25.3% higher than a year ago, while imports grew at a slightly slower pace, taking the country’s trade deficit to a five-month low of $17.4 billion, as per official estimates released on Tuesday.
While January’s goods exports are 8.75% lower than December’s all-time record figure of $37.81 billion, it takes India’s exports near the $400 billion target set for 2021-22, with the first ten months of the year, already clocking outbound shipments worth $336 billion. This marks a nearly 47% increase from a year ago and a 27.1% increase over the pre-COVID period of 2019-20.
Gold imports fell sharply during January to just $2.4 billion, 40.5% lower than the same month in 2021 and almost half the $4.72 billion imported in the previous month. The decline in the yellow metal’s imports was the biggest factor behind India’s import bill dropping to $51.9 billion in January, 12.7% from lower than December 2021.
High imports
Consequently, the trade deficit that had hit a record $22.9 billion in November 2021, and had averaged 21.7 billion since September, also dropped. Exporters, however, said high imports remain a cause of concern with January’s inbound shipments rising 23.5% year-on-year and staying above the $50 billion mark.
“The surge in gold imports in 2021 was driven by the pent-up demand of 2020 and we expect them to moderate to $30-35 billion in this calendar year,” said Aditi Nayar, chief economist at rating firm ICRA.
“The fall in mobility and the demand for gold with the onset of the third wave and the associated restrictions, helped to pull back the merchandise trade deficit to the lowest level in five months, at $17.4 billion,” she noted.
The trade data released on Tuesday revised January’s exports slightly upward from the $34.06 billion estimated earlier this month, while imports were similarly revised down from $52.01 billion.
Exports of coffee and petroleum products almost doubled in January, while cotton yarn and handloom products rose 42.4% and sectors like readymade garments, man-made yarn, leather and engineering goods grew between 20% and 25%, compared to January 2021.
Labour intensive
“Almost all the sectors reporting impressive growth last month were labour-intensive sectors contributing majorly to the exports basket, which itself is a good sign and should bolster job creation,” said A. Sakthivel, president of the Federation of Indian Exporters’ Organisations, exuding confidence that merchandise exports through the year could go past the $400 billion target. He, however, urged the government to expedite resolution of some key challenges facing firms on account of various export facilitation and promotion schemes’ implementation norms.
The Commerce and Industry Ministry pegged the value of India’s services exports during January at $26.91 billion, nearly 55% over last year’s number and 46.6% over the pre-pandemic month of January 2020. Services imports are estimated to have risen by 60.3% year-on-year to $15.8 billion, 45.3% over pre-COVID levels. However, the services trade estimations will be revised once the Reserve Bank of India updates the actual numbers.
