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Business News/ News / India/  India's exports growth lows to 19-month low in September
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India's exports growth lows to 19-month low in September

The preliminary trade data released earlier this month showed that exports contracted by 3.52% in September.

File: In the first half of the current fiscal, exports stood at $231.8 bn , up 17% over the corresponding period last year. (PC-Bloomberg)Premium
File: In the first half of the current fiscal, exports stood at $231.8 bn , up 17% over the corresponding period last year. (PC-Bloomberg)

India's merchandise exports grew at the slowest pace in 19 months and imports moderated despite sharp currency depreciation, narrowing trade deficit to a three month low in September, official data showed on Friday.

Key sectors including engineering, ready-made garments, cotton yarn, and plastics and linoleum reported a decline in exports in September compared to the corresponding month last year as demand slowed across India’s major markets including the US and the European Union amid high inflation and recessionary outlook.

India’s merchandise exports grew by 4.82% in September on year-on-year basis to touch an eight month low of $35.45bn, while imports growth slowed to 8.66% y-o-y to a five month low of $61.16 bn during the month, narrowing the trade deficit to $25.71 bn, data released by the ministry of commerce and industry showed on Friday. The trade deficit, which is the gap between exports and imports, is 14.42% higher than $ 22.47 bn in September last year. Besides slowing demand, factors including export restrictions by India on segments including wheat, steel, iron and petroleum products have also contributed to the slowdown in exports.

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Even as imports are expected to moderate in value going forward on the back of easing global commodity prices, factors like weakening global demand may further pull down exports going forward, economists cautioned. However, sharp depreciation of rupee may put pressure on imports in the coming months. Rupee plunged to an all-time low earlier this week breaching 82 against the US dollar and stood at 82.24 on Friday.

“The upward revision in merchandise exports has converted the initial contraction into a low growth. This is particularly welcome, given the growing concerns around the strength of global demand and the strengthening of the INR against many completing emerging market currencies," said Aditi Nayar, chief economist, ICRA Ltd.

The preliminary trade data released earlier this month showed that exports contracted by 3.52% in September.

“Nevertheless, non-petroleum non gems and jewellery exports have displayed a contraction suggesting a somber outlook for exports in the near term," said Nayar.

The non-oil, non- gems and jewellery exports contracted by 4.58% to $24.22 bn., while non-petroleum and non jewellery imports grew by 20.64% during the month.

In the first half of the current fiscal, exports stood at $231.8 bn , up 17% over the corresponding period last year.

The World Trade Organization last week estimated global trade growth to slow to 1% in 2023 from 3.5% in 2022 amid elevated global uncertainties.

The Union government expects India’s merchandise exports to touch $470bn in 2022-23, up from $422bn in the previous fiscal.

Overall exports also reported a 4% sequential decline in September, compared to $36.85 bn in August.

According to apparel exporters, foreign retail chains have restricted deliveries and orders in anticipation of fall in demand.

Economists expect the current account deficit to double to over 3% of GDP in 2022-23 from 1.2% of GDP last year.

“The current account deficit in the second quarter of FY23 is likely to be around 5%. Dismal exports performance of labour intensive sectors such as cotton yarn, made-ups, handloom products, handicrafts, carpet, ready-made garments, man-made yarn has an impact on the employment situation. Factoring in the WTOs global trade forecast for 2022 and 2023, it is unlikely that the exports performance to improve significantly in short-run. We expect current account deficit in FY23 to be 3.4% of GDP," said Devendra Kumar Pant, chief economist, India Ratings.

Brent crude oil price, which has been volatile for several months, is hovering around $95 per barrel, down from over $100 per barrel till two months ago.

Petroleum imports contracted by 5.38% in value terms in September over the same month last year to $15.87bn on easing international prices.

Coal imports grew by 60% y-o-y in September to $ 3.52 bn during the month, while electronic exports grew by 3.78%. Raw cotton imports shot up to 620.8% during the month to $317 million, and silver imports were up 88.3% to $1 bn in September.

Gold imports declined by 24% to $3,85 bn in September on a year on year basis. The Centre had hiked the import duty on gold from 10.75% to 15% to contain the spike in yellow metal shipments.

As for exports, engineering goods, which account for a quarter of India’s total shipments, declined by 10.85% in September over the corresponding month last year at $8.39 billion. Ready-made garments exports reported an 18.06% decline during the month. Electronic exports were up 72% to $2 bn in September.

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Dilasha Seth
" Dilasha Seth is a journalist reporting on macroeconomic policy for the last 11 years. She writes extensively on issues including international trade, macroeconomic data, fiscal policy, and taxation. At Mint, she reports on trade deals that India is signing besides key policy decisions of the Ministry of Finance. She closely tracked and covered the transition to the goods and services tax (GST) regime in 2017 and also writes on direct tax-related issues. In the past, she has worked with Business Standard and The Economic Times. She is based in Bangalore."
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Updated: 14 Oct 2022, 09:57 PM IST
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