New Delhi: India’s merchandise trade deficit widened to $18.71 billion in February from $17.49 billion in the previous month, official data showed on Friday, as imports oustripped exports in value terms against the backdrop of the Red Sea conflict
Goods imports rose to $60.11 billion in February against $54.41 billion in January, commerce ministry data showed while exports came in at $41.40 billion in February, up from $36.92 billion in January.
On a year-on-year basis exports of goods rose 11.86% in February, up from $37.01 billion in February 2023, while imports rose 12%.
Trade deficit is the difference between a country's imports and exports.
“The marginal growth in exports is mainly due to the armed conflict in the Red Sea, and if there had not been disturbances in the Suez Canal, the export figures could have been very different,” commerce secretary Sunil Barthwal said.
Meanwhile, in services, exports were flat in February -- $32.15 billion in Februry, compared with $32.80 billion a year ago -- while imports declined to $15.39 billion from $16.05 billion.
In this financial year so far, that is from April to February, merchandise exports contracted by 3.45% during February, while imports contracted by 5.32%. Services exports rose 6.76% and imports contracted 1.95% during the same period.
Commerce Secretary Sunil Barthwal said, "This is the highest export growth that we have achieved in the merchandise and services in the 11 months of the current fiscal."
“We have overshot last year’s figures. This gives us a lot of hope that when we end March, our overall exports will be higher than last year’s record exports. The trend continues despite so many difficulties," Barthwal said.
“The credit goes to our exporters, trading communities and manufacturing communities that they have been able to withstand all these difficult times,” Barthwal said at a press briefing.
“It gives us hope that predictions for 2024-25 will be much better as we have been able to withstand one of the most difficult years. That shows resilience in our export sector. The next fiscal is going to be very good year,” Barthwal added.
Overall trade deficit, including merchandise and services, stood at $72.24 billion during the April 2023-February 2024 period, down from $116.13 billion in the year-ago period.
In value terms so far this fiscal (April 2023-February 2024), India’s merchandise exports are at $394.99 billion, down 3.45%, while merchandise imports stood at $620.19 billion, down 5.32%.
Indian exports have been impacted by a slowdown in global growth. The tightening of interest rates due to nagging inflation, especially in advanced Western economies, has led to a slowdown in business, investment and trade.
Meanwhile, conflicts in Ukraine and West Asia have threatened to push up commodity oil prices, leading to greater inflationary pressures.
Rating agency Icra Ltd expects India’s monthly trade deficit to stand at about $20 billion–$25 billion in the remaining months of FY24, resulting in a current account deficit of around 2.5% of GDP in Q3 and 1.7% of GDP in Q4FY24.
During the April-February 2023-24 period, India’s top export destinations were UAE, Singapore, Netherlands, China, United Kingdom, Saudi Arab and South Africa.
Among the import sources, Russia stood at the top followed by Switzerland, China and Korea.
“A $4.4 billion jump in merchandise exports in Feb 2024 over Feb 2023 is bonus considering continued Red Sea disruptions. However, decline in India’s merchandise exports by 3.45% during Apr-Feb 2024 over previous period indicates that India merchandise exports during FY2024 will register no positive growth over FY2023. We need to revive traditional labour intensive exports like textiles, apparel and leather which are losing global share steadily,” said Ajay Srivastava, the founder of Global Trade Research Initiative (GTRI)
