India’s trade deficit narrows on lower imports

India’s merchandise trade deficit narrowed to $20.58 billion in November from a high of $31.46 billion in the previous month, helped by a sharp drop in imports, as per the official data released on Friday.

The country’s imports dropped to $54.48 billion in November 2023 from $56.95 billion recorded in the same month last year, registering a year-on-year decline of 4.33 per cent. However, on a sequential basis the decline was sharper. In October imports stood at $63.45 billion.

India’s exports also declined, albeit at a slower pace. Merchandise exports fell to $33.90 billion in November from $34.89 billion recorded in the same month last year, a decline of 2.83 per cent. November’s export print is marginally higher than $33.54 billion recorded in October. 
Addressing a media briefing Commerce Secretary Sunil Barthwal said India’s export numbers are good despite the global slowdown. He claimed that “green shoots” of recovery in outbound shipments are visible in the past few months.
 
After eight consecutive months of decline, India’s exports registered year-on-year growth in October. However, it came back in the negative territory again in November. Thus, the country’s exports growth has been in the negative terrain for 9 out of the past 10 months.  

The Commerce Secretary said the decline in India’s outbound shipments is mainly due to slowdown in demands in major trading partners, especially the US and European countries.

“Although the global trade is suffering, we are able to hold fort,” Barthwal said.

India’s overall exports, merchandise and services combined, increased by 1.23% year-on-year to $62.58 billion in November. The country’s overall imports in November 2023 stood at $67.88 billion, which is 6.16% lower when compared with the same month last year.

Robust services exports offer relief amid weak merchandise shipments. Services exports, which include software, business services, financial services, travel and communication, soared to $28.69 billion in November from $26.93 billion in the same month last year. The monthly export of services from India in November was more than double of its imports that stood at $13.40 billion.

Cumulative export of services in April-November 2023 period jumped to $220.66 billion against $208.30 billion recorded in the corresponding period of 2022. This has helped in narrowing the overall trade deficit to $61.44 billion in April-November period of the current fiscal from $100.38 billion recorded in the same period last year.

Merchandise trade deficit for April-November 2023 declined to $166.35 billion as against $189.21 billion during April-November 2022. This is largely due to a sharper decline in imports.

Over the remainder of this fiscal year, we project the monthly trade deficit in a range of $20-25 billion, resulting in a current account deficit of around 2.5% of GDP in Q3 and 1.7% of GDP in Q4 of the current financial year, said Aditi Nayar, chief economist at ICRA.

Overall, we foresee the CAD in a range of 1.7-1.8% of GDP for the financial year 2023-24, she added.

Engineering goods exports contracted 3% year-on-year in November 2023 to $7.85 billion. “After slump in the first half of the year, engineering exports turned positive in August this year, which continued through October. We remain cautiously optimistic of surpassing last year’s engineering exports,” said Arun Kumar Garodia, Chairman, Engineering Export Promotion Council of India.