Merchandise exports down 9% in Feb
China’s exports also fell in January and February at 6.8% compared to a year ago, again due to muted global demand.
New Delhi: India’s merchandise exports declined by nearly 9% in February, the third contraction in the current fiscal, led by a persistent demand slowdown across major markets including the US and the European Union.
Imports also contracted for the third straight month by value, as Indian importers spent less because of easing prices, thus narrowing the trade deficit to the second lowest in the current fiscal.
Significantly, China’s exports also fell in January and February at 6.8% compared to a year ago, again due to muted global demand.
A recessionary outlook and elevated inflation in the advanced economies saw a decline in Indian exports of gems and jewellery, cotton yarn, man-made yarn, carpets, coffee and plastic and linoleum.
India’s merchandise exports declined by 8.88% in February compared to 1.4% growth in January to touch a four-month low of $33.88bn.
Imports contracted by 8.1% to an 18-month low of $51.3 bn during the month, resulting in a trade deficit of $17.43 bn, data released by the ministry of commerce and industry showed on Wednesday.
“We will be meeting our overall trade target, services exports are doing extremely well and we have been able to contain our imports as it was also a concern. If you look at the February month data, on a month-on-month basis, the trade deficit has also come down. There was significant effort made in this direction. We looked at strategies to contain non essential imports,” commerce secretary Sunil Barthwal said.
In a bid to give a boost to outbound shipments, the government is set to announce the much-delayed foreign trade policy by the month-end, which will be effective from 1 April.
Encouragingly, there was a sequential uptick in non-oil exports, and the pace of year-on-year contraction also narrowed in February 2023 relative to the previous month. Gold imports rebounded after the Union Budget, while printing much lower than year-ago levels. We expect the trade deficit to print in the range of $18-20 billion in the ongoing month,” Aditi Nayar, chief economist, head - Research & Outreach, ICRA Ltd said.
“We believe that the current account deficit peaked at $36 billion in Q2 FY2023, and foresee a considerable moderation to $24 billion in Q4 FY2023 and $12-15 billion in Q4 FY2023,” Nayar added.
The trade deficit, which is the gap between exports and imports, is higher than the $16.34bn in the previous month but 6.7% lower than the corresponding month last year. Directorate general of foreign trade Santosh Kumar Sarangi said that mobile phone exports have seen a pick-up, crossing ₹67,333 crore by the end of January.
This comes after the government launched production linked incentives to encourage electronic manufacturing.
Responding to a question, Sarangi said that payment to Russia for oil imports has happened in different currencies including Dirham , Euro.
“It could include Yuan too as there is no ban on trading in Yuan. Any convertible currency can be utilized by the exporters,” Sarangi added.
Mint had reported that Indian exporters have flagged the issue with India’s commerce ministry, stating that acceptance of yuan payments will further strengthen the Chinese currency, running counter to the government’s objective of internationalizing the Indian rupee.
In the April-February period, merchandise exports touched $405.9 bn, which is 7.5% higher than the corresponding period last year. The government is targeting exports to touch $440bn in the current fiscal 2022-23, a growth of nearly 4% over the previous year.
As the government in November lifted export duty on iron ore and steel to arrest decline in outbound shipments and the widening the current account deficit, iron ore exports in February were up 51.37% on a year-on-year basis. While engineering goods continued to decline at 9.68%, electronic goods exports jumped 43.02% during the month. Ready-made garments exports declined by 3.18% during the month, while gems and jewellery exports jumped by 25.30%.
The non-oil, non- gems and jewellery exports contracted by 6.38% to $25.36 bn and non-petroleum and non jewellery imports declined by 2% in February to $31.05 bn during the month, reflecting industrial activity slowdown.
“Gold imports, which have a bearing on the current account deficit, declined by 44.92 per cent to $ 2.63 Billion in February 2023 in comparison to $ 4.78 Billion in February 2022. Similarly, silver imports slumped by 97.31 percent from $ 0.48 Billion in February 2022 to $ 0.01 Billion in February 2023,” statement released by the commerce ministry said.
“Amid a challenging external environment and tepid demand from key markets, engineering goods exports have seen a downward trend and recorded negative growth in seven out first 11 months of the current fiscal.There has been a significant fall in shipments of Iron and steel, aluminum, copper, and other non-ferrous metals over the past months,” EEPC India Chairman Arun Kumar Garodia’s said.Gadoria added that the collapse of two US banks and negative growth in some European markets could dampen market sentiment and further hit demand making 2023 a tough year for engineering goods manufacturers.There is hope that domestic demand led by higher public spending in the infrastructure sector will partly offset the negative growth in exports, he further stated.
With muted external demand impacting India’s exports and current account balance, the government in the Union Budget announced last month corrected inverted duty for a slew of sectors including toys, mobile phone parts, and bicycles to support domestic manufacturing. (GI) products and khadi and coir.
India’s current account deficit widened to a nine year high of 4.4% of GDP in the second quarter on account of higher trade deficit, reflecting the impact of slowing global demand on exports.
The country recorded a CAD of 3.3% of GDP in the first half of the current fiscal.
Also, the World Trade Organization in October estimated global trade growth to slow to 1% in 2023 from 3.5% in 2022 amid elevated global uncertainties.
A complete recovery in exports will depend on demand rebound in key markets, cautioned economists.
/Ends
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Business NewsEconomyMerchandise exports down 9% in Feb
First Published:15 Mar 2023, 10:33 PM IST
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