India’s merchandise exports shrank for the third month in a row and imports for the second straight month in February, according to official data released on Wednesday, reflecting the impact of global demand slump in India’s external trade.
Export of goods contracted 8.82% to $33.88 billion and imports shrank 8.21% to $51.31 billion last month, precipitating a trade deficit of $17.43 billion, the lowest since January 2022, easing the pressure on the current account.
Merchandise exports and imports had fallen by 6.59% and 3.63%, respectively, in January.
Among the major export items, not just petroleum products (down 28.8% to $4.9 billion), but engineering goods (down 9.7% to $8.6 billion), organic & inorganic chemicals (down 12.3% to $2.14 billion) and cotton yarn/fabrics/made-ups also saw sharp contraction in February, while exports of rice, iron ore, fruits & vegetables, electronic goods and gems & jewellery grew on a year-on-year basis.
As far as imports are concerned, pearls, precious & semi precious stones, crude petroleum and gold (down 44.9% to $2.63 billion) saw deep contraction, while transport equipment, machine tools and iron & steel shipments rose on year.
However, thanks to strong growth rates in the initial few months of the fiscal, overall merchandise exports still were up 7.5% to $405.94 billion in April-February, and imports rose 18.82% to $653.47 billion. The trade deficit for the April-February period stood at $247.53 billion.
The government, however, cited the strong growth in services exports. “India’s overall exports (merchandise and services combined) in February 2023 are estimated to be $63.02 billion, exhibiting a positive growth of 7.81% over the same period last year. Overall imports in February 2023 are estimated to be $65.85 billion, exhibiting a negative growth of (-) 4.38% over the same period last year,” said an official release. Overall exports (merchandise and services) in April-February 2022-23 is estimated to exhibit a positive growth of 16.18% over the same period last year. “As India’s domestic demand has remained steady amidst the global slump, overall imports in April-February 2022-23 is estimated to exhibit a growth of 19.93% over the same period last year,” it added.
Commerce secretary Sunil Barthwal said that going by the trend, India’s goods and services exports will cross $750 billion in 2022-23. “We have kept the momentum despite the global headwinds. Exporters have kept the momentum. Services exports are doing extremely well. Trade deficit has really come down. Hopefully, we will be doing better,” Barthwal said, adding that the ministry has started exercise to fix the targets for the next fiscal.
In the first advance estimates of national income, the contribution of net exports to real GDP growth was (-)2.8% points. This has improved to (-)1.9% points in the second advance estimates. However, the export slowdown compounds the worries about economic growth, as domestic demand components – private consumption and government consumption spend – have shown signs of weakness. The fall in imports bears out sluggish domestic demand.
The country’s current account deficit for the first half of 2022-23 stood at 3.3% of GDP, but it is expected to moderate in the second half. Reserve Bank of India
Finance minister Nirmala Sitharaman had said earlier the slowing economies abroad were posing a challenge to the India’s exporters. “Exporters will have to be far more receptive of what is happening there (export markets) or even foresee how that will pan out for them and keep constantly engaging with the government,” Sitharaman had said.