India’s merchandise exports fell by 1.1% in October, contracting for the third consecutive month, while imports fell for the fifth month in a row by 16.3%, leading to a trade deficit of $11 billion, according to commerce ministry figures released on Friday. However, some large export items, such as gems and jewellery, chemicals, engineering goods and pharmaceuticals, grew.
Escalating trade tensions and a slowing global economy have prompted the World Trade Organization to sharply downgrade its trade growth forecast for 2019 and 2020. World merchandise trade volumes are now expected to rise by just 1.2% in 2019, much slower than the 2.6% growth forecast in April. The projected increase in 2020 now stands at 2.7%, down from the earlier 3%. WTO has cautioned that downside risks remain high and that the 2020 projection will depend on a return to more normal trade relations.
By comparison, China’s October exports fell for the third straight month, down 0.9%, while imports shrank for the sixth consecutive month by 6.4%, leaving the country with a trade surplus of $42.81 billion, according to Chinese government data.
Out of the 30 major items each in India’s export and import baskets, 18 export items and 22 imported goods witnessed contraction. Ready-made garment exports, for instance, fell by -2.1%, and petroleum products by -14.6%. Gems and jewellery exports, however, grew by 6.02%, chemicals 0.86%, engineering goods 1.2% and pharmaceuticals by 12.6% to make a strong recovery.
Among major importing items, coal fell -28.7%, petroleum -31.7%, chemicals -24.4%, plastic material -10.5%, precious stones -17.6%, iron and steel -14.3%, and electronic goods shrank by -8.5%. However, gold imports picked up by 4.7%.
The only silver lining, signalling a probable revival in domestic investment activity, was the fall in import of electrical and non-electrical machinery by -0.45%, and of transport equipment by -14.7%.
During the first seven months of the fiscal (April-October), exports have contracted 2.2%, while imports shrank 8.4% leading to a trade deficit of $95 billion.
Engineering Export Promotion Council (EEPC) chairman Ravi Sehgal said contracting exports in October did not come as a surprise, considering the global slowdown, more so in destination countries of Indian exports. “However, the pace of degrowth for October has come down month-on-month, while engineering exports have recorded a marginal growth as well. Overall, the picture remains challenging. The government and the RBI should take measures to improve competitiveness of Indian exports," he added.
A weakening external sector will put additional pressure on India’s growth, as GDP had slowed to a six-year low of 5% in Q1, while consumption fell to a 18-quarter low.