India’s trade deficit shrinks to $20.58 billion in November, imports fall by 4.3%

India’s goods trade deficit fell almost 35% in November compared with the record high in October, Friday’s data showed, primarily due to a sharp fall in imports, and not so much due to a rise in exports.

Merchandise trade deficit fell from $31.46 billion in October 2023 to $20.58 million in November, largely because imports declined to $54.48 billion against the $65.03 billion recorded in October, commerce ministry data showed. High imports in October 2023 were caused by a spike in gold imports because of the Diwali festival being in November this year.

Last year, Diwali was celebrated in October.

Exports, meanwhile, rose marginally to $33.90 billion in November, compared with $33.57 billion in October.

The government sees the beginning of some recovery in exports in the data. “We are seeing that green shoots are stabilizing,” commerce secretary Sunil Barthwal said at a press briefing after the release of the trade data. “Typically, the last quarter of the year sees a sharp rise in exports,” he added.

In y-o-y (year-on-year) terms, too, the trade deficit this November ($20.58 million) is lower than in November 2022, when it was at $26.31 billion.

So far this fiscal (April-November 2023), India’s merchandise exports stood at $278.80 billion, down 6.51% annually, while merchandise imports stood at $445.15 billion, down 8.67% annually.

“The trade deficit of November is above normal. We usually have a large merchandise trade deficit. It is difficult to assume the future scenario, as it depends on what happens at the global economy (level),” said Pronab Sen, former country director for the India Programme of the International Growth Centre (IGC).

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 oil prices, leading to greater inflationary pressures.

Rating agency Icra Ltd expects monthly trade deficit at $20 billion–$25 billion in the remaining months of FY24, which would result in a current account deficit of around 2.5% of GDP in Q3 and 1.7% of GDP in Q4FY24.

The latest data reflects the slowdown in global trade, with the World Trade Organization (WTO) slashing global trade growth forecast for calendar year 2023 by 50% from its earlier forecast, said Ajay Sahai, director general of the Federation of Indian Export Organisations.

The WTO expects world trade volume to grow by 0.8% annually in calendar year 2023, down from 1.7% estimated earlier by the agency.

“The trade data points out that the decline has happened due to global slowdown. It is not as people were expecting. However, such a margin is not a cause of concern, given the global trend,” Sahai added.

India’s top merchandise export destinations during April-November 2023 were the US, the UAE, the Netherlands, China, the UK, Singapore, Saudi Arabia, and Bangladesh.

Top import sources were China, Russia, the US, the UAE, Saudi Arabia and Iraq, according to official data released on Friday.

Meanwhile, services exports, too, has stood still in November at $28.69 billion compared to $28.70 billion in October, and imports fell to $13.40 billion from $14.32 billion in the previous month.