New Delhi: India’s merchandise exports as well as imports contracted the most in more than three years in September, reflecting a slump in global demand as well as in India.
Merchandise exports shrank 6.57% to $26 billion, while imports dropped 13.9% to $36.9 billion, narrowing India’s trade deficit to a seven-month low of $10.9 billion, showed data released by the commerce department on Tuesday.
Out of the 30 major items in India’s export and import baskets, 22 export items and 25 that are imported saw a contraction. Among large export items, gems and jewellery (-5.56%), chemicals (-3.5%), engineering goods (-6.2%), ready-made garments (-2.2%) and petroleum products (-18.6%) contracted, while export of pharmaceuticals was the only item to have expanded (8.7%).
Among major importing items, import of coal (-24%), petroleum (-18.3%), chemicals (-16.2%), plastic material (-10.7%), precious stones (-17.3%), iron and steel (-14.6%), electronic goods (-0.14%) and gold (-50.8%) shrank. The only silver lining that signalled a probable revival in domestic investment activity was import of electrical and non-electrical machinery, which shot up 19.4% although import of transport equipment slumped 51%.
Rising trade tensions have unsettled the slowing world economy and prompted the World Trade Organization (WTO) to slash its trade forecasts for 2019 and 2020 to 1.2 % and 2.7%, respectively. IMF on Tuesday cut global economic growth forecast for 2019 by 20 basis points to 3%, holding that the global outlook remains precarious with a synchronized slowdown and uncertain recovery.
Sharad Kumar Saraf, president of the Federation of Indian Export Organisations, said the declining trend in exports does not augur well for overall growth of the Indian economy. “The softening of commodity prices including crude, US-China trade war, Brexit and developments in Iran, Turkey and other Gulf nations have further aggravated the problem of the world economy," he said. “The uncertainty has also affected the flow of investment and added to currency volatility."
Saraf said domestic issues, including access to and cost of credit remains a problem area for MSMEs and merchant exporters. “Interest equalization support to all agri exports, benefits on sales to foreign tourists and quick refund of goods and services tax, specially input tax credit refund, should be quickly and seriously looked into. Further, WTO-compliant scheme of newly launched RoDTEP (Remission of Duties or Taxes on Export Product) should be immediately deliberated and drafted to give a much needed boost to the exports sector."