This financial year is off to a subdued start on the trade front. Goods exports slumped to $34.6 billion in April, the lowest since last October — the worst month for outbound shipments in 2022-23. This was the third successive contraction in exports, and 12.7% below last April’s numbers. Imports shrank by a sharper 14% to trip to a 15-month low of under $50 billion. A slowing global economy had been hurting exports through the second half of 2022-23, with declines in four of six months. But April’s initial estimates are troubling not just because they represent the steepest fall in recent months but also signal a sudden shift in sequential momentum akin to the use of emergency handbrakes. This March, despite lingering global demand weakness, exports had hit a nine-month high of nearly $42 billion while imports were $60 billion. The new Foreign Trade Policy enunciated a two trillion-dollar export goal to be achieved in seven years. Its first month of implementation could not have been off to a shakier start. The prospects of last year’s healthy 14.7% growth that lifted total exports to about $776 billion being replicated in 2023-24 look bleak already.
One may draw some succour from the trade deficit easing to a 20-month low. But managing the trade deficit cannot be the goal for policymakers. Falling imports also indicate that domestic demand, India’s proclaimed insulation against global headwinds, is ebbing. Moreover, when imports of petroleum (down 14%), and gems and jewellery plummet, they also affect exports of value-added end products. Petroleum exports shrank 17.5% in April, while jewellery shipments slipped at 30%, marking the seventh contraction in 10 months even as other job creators such as textiles have been hit hard. That commodity prices have cooled from last year is only one reason for the shrinking trade basket. Officials concede there does not seem to be any immediate respite likely from faltering global demand. China’s opening up of the economy may have prompted a global trade growth forecast hike (from 1% to 1.7%) for 2023 from the WTO, but recent Chinese data have been underwhelming about the recovery momentum. Reluctant European and North American markets are only expected to speed up goods orders by September for the festive season, while services exports that have held up through the recent trade turmoil, may slow too. India must use this slack period to review its overall trade stance, the reliance on a few large markets, and pursue greater integration with global value chains and multilateral trading arrangements. These would yield better outcomes than fresh measures to hold down the import bill.