New Delhi: India’s merchandise exports in August declined for the second time in the current financial year, which began in April, while imports dropped for the third consecutive month, signalling that rising protectionism and trade tensions between the US and China are impacting India’s trade prospects as well.
Data released by the commerce ministry showed India’s merchandise exports declined 6.05% in August while merchandise imports dropped 13.45% leading to the narrowing of trade deficit to $13.45 billion during the same month.
Comparatively, China’s exports in August fell 1%, while imports shrank 5.6%, amidst intensifying trade war with the US.
Export sectors that recorded positive growth in the last month include iron ore, electronic goods, spices, and marine products.
Shipments of gems and jewellery, engineering goods, petroleum products recorded negative growth, according to the data.
Aditi Nayar, Principal economist, ICRA Ltd said a sharp contraction in gold as well as non-oil non-gold merchandise imports led to the considerable shrinking of the merchandise trade deficit in August. “Available trends suggest that the current account deficit is likely to decline substantially to $10-11 billion in the September quarter of 2019-20, on the back of moderate crude oil prices, a weak appetite for gold imports at current prices as well as subdued domestic demand," she added.
Sharad Kumar Saraf, president of Federation of Indian Export Organisations said that such a contraction in exports is a reflection of uncertainties, sluggish global demand and rising tariff war. “Domestic issues, including access to credit, cost of credit especially for merchant exporters, interest equalization support to all agri exports, benefits on sales to foreign tourists and quick refund of GST, especially input tax credit refund, should be seriously looked into. Further, WTO compliant schemes addressing cost disabilities of our economy should be immediately deliberated and drafted so as to replace some export promotion instruments to give a much needed boost to the exports sector," he added.
In March, the World Trade Organization (WTO) projected trade growth to fall from 3.9% in 2018 to 3.7% in 2019. It had cautioned that these estimates could be revised downward if trade conditions continue to deteriorate.
The World Bank in its Global Economic Prospects, released in June, has projected weakening of global trade in 2019.
Global trade is projected to grow at 2.6% this year— a full percentage point below its own previous forecast.
The International Monetary Fund also cut the global growth forecast for 2019 by 20 basis points to 3.3%, the lowest since the 2008 financial crisis, blaming the US-China trade tensions, loss of momentum in Europe and the uncertainty surrounding Brexit.