India’s goods exports plummeted 22.02% year-over-year in June to hit an eight-month low of $32.97 billion, while imports fell 17.5% to $53.1 billion, as per data from the Commerce Ministry.
June marked the seventh time in nine months that India’s merchandise exports have declined, but the dip in outbound shipments was the sharpest in this period.
The goods trade deficit for June fell 8.8% from levels seen last June as well as this May, to $20.13 billion. This is the second month in a row that the deficit has been over $20 billion after a four-month streak of lower gaps between imports and exports, but economists aren’t too worried about the scale of the deficit yet relative to last year’s higher gaps.
After a 6.7% rise in 2022-23 that lifted goods exports past a record $450 billion, outbound shipments have now tanked 15.13% in the first quarter (Q1) of 2023-24, to a little over $102 billion, while imports over the same period have dropped 12.7% to $160.3 billion.
“The trade deficit in Q1 was lower at $57.6 billion versus $ 62.6 billion last year. This trend is likely to continue this year, with exports facing increasing headwinds from a weak world economy, while lower commodity prices may provide some relief,” said Bank of Baroda economist Aditi Gupta.
Commerce Secretary Sunil Barthwal emphasised that the fall in exports appeared steep partly due to the strong base from last June, when India recorded its highest monthly shipments of $42.3 billion.
The broader declining trend, he stressed, is driven by slower demand for Indian goods from large markets like the U.S. and Europe, where growth is slowing down and interest rate hikes to curb inflation are further denting business levels.
“There was also an inventory build-up last year to cope with supply-chain disruptions. Now, export promotion councils are reporting those inventories are gradually winding down, and orders are starting to pick up again from July, and we hope that translates into good news for exporters,” he said, stressing that the government is doing whatever it can to spur trade growth.
Mr. Barthwal said that the decline in goods imports was driven by lower commodity prices as well as some cooling in domestic demand.
“In absolute terms, petroleum products accounted for half the fall in exports this June,” noted Aditi Nayar, chief economist at ICRA. Just nine of India’s top 30 major export as well as import items recorded positive growth in June.
“Non-oil, non-gold imports fell by a sharp 14.5%, after rising 1.7% in May. Gold imports rose 82.4%, despite a fall in international prices. In a departure from the trend of the past few months, imports of industrial goods were in the red after relatively resilient growth earlier,” Barclays analysts Rahul Bajoria, Shreya Sodhani and Amruta Ghare said in a note that argued the trade deficit is at a “manageable level”.
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