Reflecting the slump in global trade and a moderation in domestic investment, and consumption demands, India’s merchandise exports and imports shrank by 6.59% and 3.63%, respectively, in dollar terms in January, showed an official data released on Wednesday.
While both outward and inward shipments shrank for the second straight month, exports contraction was also the third in four months. The dip in exports, largely driven by sharp falls in shipments from labour-intensive industries like textiles, gems & jewellery and engineering goods could dent the country’s economic growth prospects if it lasts for long, besides further aggravating the jobs scenario.
Merchandise trade deficit, however, dipped to a 12-month low of $17.75 billion in January. Lower goods trade deficit, along with the strong surpluses in net balance under services and robust remittances, is expected to allay the concerns over the current account deficit (CAD).
Finance minister Nirmala Sitharaman on Wednesday cautioned that slowing economies abroad are going to pose 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 said, addressing an event organised by industry body Assocham.
The CAD 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 governor Shaktikanta Das had said in a statement after the February review of the monetary policy that global software and IT services spending would remain strong in 2023. The CAD would remain “eminently manageable and within the parameters of viability”, he had said.
Decline in imports during January was mainly because of the slowing of imports of gold, electronic goods, pearls, precious & semi-precious stones, silver and organic and inorganic chemicals.
According to the official data, merchandise exports stood at $32.91 billion in January and imports at $50.66 billion. Cumulatively, during April-January 2022-23, exports rose 8.51% $369.25 billion, while imports increased 21.89% $602.20 billion. Trade deficit for April-January stood at about $233 billion. The country’s goods exports had contracted by 12.2% to $34.48 billion in December 2022.
In a statement, the commerce ministry said, “Non-petroleum and non-gems & jewellery exports in January 2023 were $25.35 billion, compared to $27.41 billion in January 2022. Non-petroleum, non-gems & jewellery (gold, silver & precious metals) imports in January 2023 were $33.56 billion, compared to $34.90 billion in January 2022.”
“Merchandise exports are also cumulatively growing at 8.5%. We are optimistic that this growth momentum would continue despite strong global headwinds,” commerce secretary Sunil Barthwal said.
Key sectors that showed negative growth in exports in January are “cotton yarn, fabrics, made-ups, handloom products, etc’, (-37.42%), “man-made yarn/fabrics/made-ups” (-21.12%), gems and jewellery ((-19.28%), drugs and pharmaceuticals (-2.62%), organic and inorganic chemicals (-4.57%), engineering goods (-9.8%) and meat dairy and poultry products (-13.27%). However, 14 of the top 30 key product sectors have exhibited positive growth in January; these include electronic goods (55.54%), oil meals (48.89%), oil seeds (23.81%), iron ore (21%), rice (18.8%) and fruits & vegetables (14.57%).
Federation of Indian Export Organisations president A Sakthivel said, “The focus should be on providing easy liquidity at competitive cost, restoration of the interest equalisation support to 5% and 3%, respectively, IGST exemption on freight on exports, extension of tenure of PCFC from 180 days to 365 days and notification of RoDTEP rates for the holders of Advance Authorisation, DFIA and EOU units.”
The commerce ministry noted that India’s overall exports (merchandise and services combined) in January 2023 are estimated to be $65.15 billion, up 14.58% on year. Overall imports in January are estimated to be $66.42 billion, up 0.94% on year. Overall exports (good and services) in April-January 2022-23 is seen to show a growth of 17.33% and imports, a growth of 22.92%.