Merchandise exports hit $40.2 billion in April, which is a record for the first month of any fiscal, having jumped 30.7% from a year before. However, imports jumped at a faster pace of 31% in April to $60.3 billion, driven by high commodity prices, especially of energy products. This widened trade deficit in April to $20.1 billion from $18.5 billion in the previous month.
Without substantial easing of international commodity prices, trade deficit will likely exceed the crucial $20-billion mark in most of the months in FY23, according to an Icra estimate. Consequently, the CAD is estimated to rise to $20-23 billion in the June quarter, compared with $15.5-17.5 billion in the previous three months, according to Icra. Of course, senior government officials have assuaged concerns about financing the CAD.
Among high-value segments, the rise in exports in April was led by petroleum products (128%), followed by electronics (72%), chemicals (28%). Even core exports (excluding petroleum and gems and jewellery) grew 19.9% on year in April to $28.5 billion, reflecting the impact of decent external demand and elevated commodity prices.
Similarly, core imports jumped at a faster pace of 34.4% in April to $35.7 billion. Among the key commodity segments, purchases of coal jumped 146% to $4.9 billion, petroleum 88% to $20.2 billion and electronics 33% to $6.7 billion.
Although orders are still pouring in from certain jurisdictions, the supply-side disruptions in the aftermath of the Russia-Ukraine war have hit domestic exporters’ ability to ship out goods. The surge in international shipping costs has made the matter worse. The World Trade Organisation, too, has slashed its 2022 global trade growth forecast to 3% from an earlier projection of 4.7%, which would weigh on the prospects of Indian exports as well.
However, commerce and industry minister Piyush Goyal earlier exuded confidence that exports will keep up the good pace in the current fiscal as well, as benefits from the recently-concluded free trade agreement with the UAE and another deal with Australia will outweigh potential losses caused by any geopolitical tension.
Importantly, merchandise exports hit a record $422 billion in FY22, as an industrial resurgence in advanced economies (before the Ukraine war in late February) stirred demand for Indian goods. The country’s exports had remained below par in the past decade, having fluctuated between $250 billion and $330 billion a year since FY11; the highest export of $330 billion was achieved in FY19. So, a sustained surge in exports for a few years will be crucial to India recapturing its lost market share, analysts have said.
A Sakthivel, president of the apex export body FIEO, said: “Benefits of the newly signed FTAs and the PLI scheme will further help us in building on the milestones achieved during the previous fiscal.”