India’s Foreign Trade Has Hit A Bump In The Face Of Global Uncertainties

All is not well with India’s exports this financial year and the global uncertainties has made matters worse when one reads between the lines the data of exports of goods and services in the first half of this financial year 2023-24. This meant that India’s dream of achieving $ 1 trillion exports of goods and services in next year or two will get pushed further.

On the face of it India’s overall exports (goods & services) looked good in the difficult global situation as it grew by 14.76% to US $ 776.38 billion in 2022-23 (April – March) powered by the 27.82% services export growth along with the 6.89 % merchandise export growth. But when some number crunching is done, India’s Overall exports of $ 63.84 billion in September 2023 and $ 376.9 billion in the first half (April September) of 2023-24 are officially estimated to register negative growths of (-)1.20 percent and (-)2.97 per cent respectively over the corresponding period of the previous.

According to trade expert and for senior economic advisor in the finance ministry, H A C Prasad, this is mainly due to the negative growth in merchandise exports of (-) 3.1 per cent in September 2023 and (-) 8.77 percent in April-September 2023. Services exports grew marginally by 0.51 per cent in September 2023 and by a moderate 5.65 percent in April-September 2023.

The fall in merchandise exports and moderate growth of services exports in April-September 2023 is partly due to the base effect, as there was a high growth in merchandise exports (16.89 percent) and a high growth in services exports (27.26 per cent) in April-September 2022, which in turn is due to the post-covid pick up in exports, Prasad said.

The decline came at a time when World economic growth is projected by IMF to slow down to 3 per cent in 2023 from 3.5 per cent in 2022 and decelerate further to 2.9 per cent in 2024. Also the deceleration is notably in advanced economies, which is not good as India’s exports to advanced economies is significant.

“But what is really worrying for us (India) is that World trade volume (goods and services) growth is projected to decelerate sharply from 5.1 per cent in 2022 to 0.9 per cent in 2023,” Prasad said adding in case of advanced economies , import growth is is projected to decelerate from 6.7 per cent in 2022 to 0.1 per cent in 2023 and exports slowdown from 5.3 per cent in 2022 to 1.8 per cent 2023.

There are other downside risks as well that growth in services growth, particularly tourism is expected to be slower coupled with likely surge in oil prices in the face of War in the middle-east.

Analysing the sector-wise data Prasad said merchandise exports recorded negative growth in important items in the first half of 2023-24. The sectors included Engineering goods (-2.82 percent), Petroleum products (-17.61 per cent), Gems &Jewellery (-24.31 per cent) and Organic and Inorganic chemicals (-15.16 per cent).

Some export items with good/moderate positive growth are Electronic goods (27.62 per cent) and Drugs & Pharmaceuticals (5.02 per cent). Cotton yarn/ fabrics, made-ups, handloom products, etc., category also had a small positive growth (1.83 per cent).

Prasad said sector-wise services exports data for April-September 2023-24 are not yet available. But as per RBI’s balance of payment data, services exports in the first two quarters of this financial year was moderate at 5.89 per cent and 5.65 per cent respectively. High negative growth was registered in Transportation (-24.77 per cent), which is also a reflection of the fall in merchandise exports. Communication services clocked negative 13.54 per cent.

Like exports, growth of Overall Imports (Goods & Services) was negative in the first half of 2023-24 at (-)10.14 per cent. This was due to the fall in both merchandise and services imports by 12.23 per cent and 1.50 per cent respectively, Prasad said.

Summing up, Prasad said the silver lining in India’s exports is that there are some positive signs including recent removal of trade barriers in Indo-US bilateral trade but the dampener could be prolonged Gaza war and weakened European economy. (IPA Service)