In a recent economic report, India’s merchandise exports experienced a 2.6% year-on-year decline, with total exports amounting to $34.47 billion for the month of September. This decrease was mirrored by a substantial contraction in imports, which fell by 15% to $53.84 billion compared to September 2022.
The significant reduction in imports led to India’s trade deficit hitting a five-month low of $19.37 billion in September, marking a year-on-year drop of over 30% from the previous year’s $27.98 billion.
India’s merchandise exports have been on a consistent downward trajectory, impacted by global economic headwinds and recessionary conditions in key export markets. Nevertheless, there is a glimmer of hope, as non-petroleum and non-gems & jewelry exports displayed a 1.86% increase, suggesting a potential reversal of the declining trend.
Commerce Secretary Sunil Barthwal expressed optimism, stating that the export scenario is improving, and positive growth can be expected in the coming months. He noted a significant reduction in the year-on-year export gap and cited positive trends in the weekly data received by the Ministry of Commerce for the month of October.
In contrast, services exports reached $29.37 billion, reporting only a marginal uptick from the previous year. Services imports, however, witnessed a significant decline, falling from $16.27 billion in September last year to $14.91 billion this year.
For the first half of the fiscal year 2023-24, merchandise exports were down by 8.7% year-on-year, while imports were lower by 12.2%. Notably, several principal commodities, including petroleum products and marine products, showed positive growth in export volumes.
The decline in imports can be attributed to price moderation and correction, with the sharp drop in commodity prices, including soya oil, petroleum products, and iron & steel. Import substitution has also played a role in this fall, driven by improvements in India’s production capacity and initiatives like the Production Linked Incentive (PLI) scheme.
To mitigate the impact of falling exports, India is exploring new markets for its products. While traditional trading partners like the US, China, Bangladesh, and Singapore have seen reduced demand, India has been diversifying its export markets. Exports of office equipment to Turkey, drugs and pharmaceuticals to Finland, and mica to the Philippines have shown promise in newer markets.
This strategy aims to counter the subdued demand from traditional trading partners, and early data suggests that it is yielding positive results. The diversification of imports and exports is seen as a crucial step to limit the effects of a slowdown in demand from major economies.
