After hitting a record $775 billion in 2022-23, India’s exports are off to a rocky start this year. Outbound shipments of goods, that had crossed $450 billion last year, have contracted 15.1% through the April to June 2023 quarter. June’s provisional export tally, just shy of $33 billion, was the lowest figure in eight months and reflected a 22% drop year-on-year, a scale of contraction last seen amid the initial months of the COVID-19 lockdowns. There has been a decline in the import bill as well over the first quarter, albeit at a slower pace than exports. This 12.7% dip is largely driven by the prevalence of lower commodity prices this year compared to the same quarter last year, when the import bill had shot up 44.5% after the Russia-Ukraine conflict erupted. Excluding gold and oil imports, the value of shipments coming into the country is down 10.5% in the first quarter. Sequentially, the decline in non-oil, non-gold imports has accelerated from 2% in May to 16.7% in June, indicating that domestic demand triggers are also ebbing. While this implies the goods trade deficit may not widen as it had last year, it does not augur well for domestic growth impulses that form India’s key armour against the gathering global slowdown.
Services exports are still growing but at a far more sombre pace. That IT majors, who drive most of these intangible exports, have been tentative and decidedly downcast about their earnings guidance for this year, indicates the tide may get worse. Frail global demand may not just impact trade flows but also hurt foreign direct investments even as tightening monetary policies could exacerbate financial market volatility. As the Finance Ministry noted recently, if these trends deepen, the 6.5% growth hopes for the year could wobble. But retail sales in the U.K. have improved in June, although fractionally. The U.S. Treasury Secretary Janet Yellen has exuded confidence that a recession in the world’s largest economy may be averted after all. Inflation numbers have eased in Europe and the U.S., triggering hopes of interest rate pauses instead of further tightening to throttle demand and activity. While driving on the hills, one has to prioritise the movement of vehicles climbing up, even if that means reversing a descending automobile up to a point of safe passage. Within the overall downhill trend of exports, the few bright spots such as rising shipments of electronic goods must flourish while trade curbs or obstacles affecting other products must be reviewed. Indian policymakers should redouble efforts to improve competitiveness vis-à-vis rivals such as Vietnam, and keep a closer watch on divergent trends in different markets to help exporters capture incremental, even if fractional, global demand.