India Exim Bank projects rise in Q2 merchandise exports to $111.7 bn amid global uncertainties

The Export-Import Bank of India (India Exim Bank) has projected that the country's merchandise exports will hit $111.7 billion—a record—in the second quarter of current fiscal year (Q2 FY25), marking a 4.2% year-on-year growth. Merchandise exports stood at was $109.11 billion in April-June.

Non-oil exports are expected to contribute $89.8 billion, a 6.26% increase year-on-year. This forecast underscores the continued positive trajectory of India’s trade performance amid robust economic activity.

Economic momentum and global outlook

The optimistic forecast is supported by sustained momentum in India’s manufacturing and services sectors, bolstered by government initiatives such as 'Make in India' and ‘Atmanirbhar Bharat’. These programmes aim to reduce import dependency and strengthen domestic production, contributing to the resilience of India’s manufacturing sector.

Global factors also play a critical role. Expectations of global monetary easing and improving demand in key trading partners provide a favourable environment for India’s exports. 

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According to the World Trade Organization (WTO), global merchandise trade volume is anticipated to grow 2.5% in 2024, offering a supportive backdrop for India's export activities.

However, the India Exim Bank report cautions that risks remain. Uncertain economic prospects in advanced economies, geopolitical tensions, and ongoing conflicts in West Asia could pose significant challenges. Additionally, global supply chain disruptions and deepening geo-economic fragmentation may hinder export growth.

Trade deficit and projections

India's merchandise trade deficit, which hit a seven-month high in May, showed signs of narrowing in June. The deficit stood at $20.98 billion in June, down from $23.78 billion in May but slightly higher than the $19.1 billion recorded in April. Despite this, the June figure exceeded analyst expectations, with a Reuters poll predicting a $21.5 billion deficit.

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The volatility in global oil prices and fluctuating demand in major economies add further uncertainty to the forecast. Nonetheless, India’s trade performance has demonstrated a robust post-pandemic recovery, with merchandise exports surpassing $400 billion for the first time in FY24, reaching a record $433.09 billion.

The commerce ministry continues to proactively identify new markets and diversify its export base, with a focus on emerging economies in Africa, Latin America, and Southeast Asia.

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India Exim Bank's projections are based on its Export Leading Index (ELI) model, which tracks various economic indicators to provide insights into future export trends. The next forecast, covering the third quarter of FY25 (October-December), is expected to be released in the first fortnight of November.