In September, 2023, India witnessed a remarkable transformation in its merchandise trade dynamics. The trade deficit, a perennial concern, underwent a significant reduction to a mere $19.37 billion. This figure, the lowest in half a year, was primarily attributed to a substantial 15% year-on-year drop in imports. The plummeting import figures can be predominantly ascribed to the decline in global prices of commodities and crude oil, bringing a welcome respite to the Indian trade landscape.
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The saga of Indian trade continued as merchandise exports took a slight dip of 2.6%, amounting to $34.47 billion in September. This was in stark contrast to the $35.39 billion recorded during the same period the previous year. On the flip side, India’s imports witnessed a more pronounced transformation, plummeting from $63.37 billion in September 2022 to a mere $53.84 billion in September 2023. This drastic 15% year-on-year decline marked a remarkable shift in the trade dynamics.
Trade deficit shrinks by 30% year-on-year
The spectacle reached its zenith when the September trade deficit exhibited a staggering 30% decrease compared to its counterpart in September 2022, plunging from $27.98 billion to its current $19.37 billion. This remarkable feat was in stark contrast to the previous month of August, where the trade deficit stood at a daunting $24.16 billion, marking the highest level in the past ten months.
The narrative of India’s trade is not without its share of adversity, as there has been a persistent decline in exports throughout the current financial year. Cumulatively, India’s exports in the first half of the fiscal year amounted to $211.4 billion, marking an 8.77% decrease when compared to the corresponding period of the previous year.
Despite the overarching challenges, there is a glimmer of hope on the horizon. Commerce Secretary Sunil Barthwal expressed optimism by stating, “Our falling export trend is reversing as green shoots show up. For the remaining six months, there should definitely be positive growth in our exports.”
The weekly trend in exports during the current month indicates a positive movement. This promising outlook for India’s exports comes in the backdrop of the World Trade Organisation (WTO) forecasting a global trade growth of only 0.8% in 2023.
The upward revision of India’s exports
Commerce Secretary Sunil Barthwal highlighted India’s growing exports, including expansion into new markets such as Turkey for office equipment and Finland, Malta, and the Philippines for drug formulations. He attributed the decline in imports to India’s successful import substitution policy and falling global commodity prices, particularly in crude oil.
In September, exports from 12 out of 30 key sectors showed positive growth, with notable gains in iron ore, cotton yarn/fabrics, meat, dairy, poultry products, pharmaceuticals, engineering, and marine products. However, sectors like petroleum products, textiles, electronic goods, chemicals, gems and jewelry, leather, tea, and coffee recorded negative growth. The government revised August’s exports to $38.45 billion, up from the previously reported $34.48 billion, while imports were adjusted to $60.1 billion, surpassing the earlier figure of $58.64 billion. This revision indicated a 3.88% growth in exports for August, reflecting the resilience of India’s trade sector.
Despite an initial reported decline of 6.86%, government data released on September 15 showed a substantial upward revision of approximately $4 billion for August. Secretary Barthwal explained that sometimes shipments leave but their numbers don’t get recorded, and customs inspections can further delay data release.
Non-petroleum and non-gems & jewelry merchandise exports showed a positive year-on-year increase of 1.86% in September. The engineering sector experienced a resurgence, with exports surging by 6.8% to $8.91 billion in September. Electronic goods exports took center stage, witnessing a significant 27.6% surge to reach $13.11 billion during the April-September period in 2023, compared to the corresponding period of the previous year. These trends signify India’s positive export growth and indicate the country’s potential for economic growth in various sectors.
Import substitution strategy replied in favour
The substantial decline in imports played a pivotal role in narrowing the trade deficit, with merchandise imports for the period April-September 2023 falling to $326.98 billion, a stark contrast to the $372.56 billion recorded during the same period the previous year, marking a substantial drop of 12.23%.
The Director General of Foreign Trade, Santosh Sarangi, pointed out, “Last year, due to the Russia Ukraine conflict, prices of several commodities including soya oil, petroleum products, iron & steel had all shot up, which have come down significantly now. The fall can thus be attributed to this sharp decline in prices.” This price correction has played a pivotal role in reshaping India’s trade landscape and holds promise for the nation’s economic future.
In the inaugural half of the current fiscal year, India experienced a striking transformation in its merchandise trade balance. The trade deficit significantly contracted, diminishing from the formidable $140.83 billion recorded in the corresponding period of the previous year to a more manageable $115.58 billion.
The unfolding narrative of India’s trade journey continued to reveal its intricacies, with overall exports, encompassing both merchandise and services, encountering a modest decline of 1.20%. In September, they tallied to $63.84 billion. In stark contrast, overall imports witnessed a more pronounced downturn, plunging by a substantial 13.67% to reach $68.75 billion during the month under review.
This extraordinary shift in trade dynamics re/ached its climax with the significant contraction in the overall trade deficit. It narrowed down to a mere $4.92 billion in September, presenting a stark contrast to the daunting $15.03 billion recorded during the same month the previous year. These developments signify a remarkable transformation in India’s trade landscape, marking a pivotal step towards a more balanced and sustainable economic outlook.
Oil imports plummet, Gold shines
Overall, September witnessed 20 out of 30 key sectors reporting negative growth, encompassing silver, fertilizers, transport equipment, coal, coke, vegetable oil, pearls, precious and semi-precious stones, crude oil, chemicals, and machine tools. Notably, oil imports in September experienced a substantial decline of 20.32 percent, amounting to $14 billion. Over the course of the first half of the fiscal year, imports recorded a remarkable decrease of 22.81 percent, reducing to $82.3 billion.
In contrast, gold imports in September saw a notable upswing, rising by 7 percent to reach $4.11 billion. During the first half of the fiscal year, imports in this category surged by a substantial 9.8 percent, tallying to $22.2 billion. These fluctuations and trends in imports and exports unveil a dynamic landscape, reflecting the intricate balance of global and domestic economic factors.
According to the data, services exports in September are estimated at $29.37 billion, showing a modest increase compared to $29.2 billion in the same period the previous year. On the other hand, imports of services for the same month stood at $14.91 billion, down from $16.27 billion a year ago.
The estimates for services exported during the period from April to September 2023 amounted to a noteworthy $164.89 billion. This figure represented a positive trend, marking an increase compared to the $156 billion recorded during the corresponding period in 2022. These developments reflect the resilience and growth potential in India’s services sector, contributing to the country’s trade landscape.
