Trade deficit eases as imports plunge

India’s trade deficit narrowed in September as imports plunged and exports continued to slide amid slowing demand in the West and China.

Goods exports slipped marginally by 2.59% to $34.47 billion compared to $35.39 billion in September 2022, while imports fell a steeper 15% to $53.84 billion against $63.37 billion a year earlier. Consequently, the trade deficit fell to $19.37 billion, down over 30% from $27.98 billion a year ago, commerce ministry data showed.

“India’s merchandise trade deficit compressed considerably to $19.4 billion in September 2023 from $28 billion in the year-ago month, with a sharp contraction in imports reflecting the impact of lower commodity prices,” said Aditi Nayar, chief economist, ICRA Ltd.

“The narrower-than-expected merchandise trade deficit print augurs well for the current account deficit (CAD) for Q2 FY24, although it is expected to enlarge vis-à-vis the Q1 levels. Crude oil price volatility amid geo-political tensions remains a risk to the CAD outlook for H2 FY2024,” Nayar added.

Export restrictions, particularly on items such as cereals and rice, have taken a toll on the country’s outbound trade. Exports in the ‘other cereals’ category declined over 50% in September compared to last year. Rice exports fell 25%, leather & leather products 21.2%, spices 19.5%, gems & jewellery 16%, and petroleum products exports nearly 11%.

Notably, electronic goods exports have been rising so far, fell by 3.69%, and tea slipped by 3.03%.

Meanwhile, engineering goods exports rose 6.79%; ceramic products & glassware 50.49%; cotton yarn and handloom products 27.39%; meat, dairy & poultry products 19.4%; and drugs & pharmaceuticals exports 9.01%.

Commerce secretary Sunil Barthwal said: “Last month, we saw some green shoots in terms of improvement in exports, although the global scenario is quite bleak. This has been confirmed by September data. We are also looking at the weekly trend. And it is positive. The WTO forecast is showing that the growth rate will decline. Despite that, if we are growing, it’s good news for us.” On the recent import restriction on laptops, the secretary said that “there is no restriction as such”.

“We are only saying that whoever is importing these laptops they have to be under close watch so that we can look at these imports. We have PLI in the sector, so we are also looking at production capacity figures. It is basically monitoring what we are doing. It has nothing to do with restrictions,” he added.

Arun Kumar Garodia, chairman of the Engineering Export Promotion Council of India, said that after the reversal of the declining trend last August, engineering goods exports recorded positive growth in September.

“The recent war between Israel and Hamas in the Middle East has, however, added to the uncertainties faced by the global economy and trade. In fact, the world has faced multiple crises after it was badly hit by the covid pandemic in early 2020,” Garodia said.

Santosh Kumar Sarangi, Director General Foreign Trade (DGFT), said the new system would be an “import management system” which will take effect on 1 November.

“There have been a number of stakeholder consultations done by the ministry of electronics and information technology (Meity) and DGFT. The stakeholders had raised a number of concerns,” he said.