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India’s Goods Exports Decline, but Trade Performance Shows Promise
Goods exports dipped 2.6% from last September to hit a three-month low of $34.47 billion. File image for representation.| Photo Credit: The Hindu
Even though goods exports declined for the seventh time in eight months in September, India’s weak foreign trade performance so far this year appeared to be turning around as per data released by the Commerce Ministry on Friday, which included revisions worth over $5 billion to August’s trade tally.
While goods exports dipped 2.6% from last September to hit a three-month low of $34.47 billion, imports dropped by a sharper 15% to $53.84 billion, and were 10.4% below August’s updated import bill of $60.1 billion, which marked an 11-month high.
August’s goods exports were ramped up by a record $4 billion to $38.45 billion, the highest in five months and reflecting a 3.88% growth over last August. This was the first uptick after six months of contraction and Commerce Secretary Sunil Barthwal expressed hope that the second half of 2023-24 will bring sustained growth in goods exports.
Revised figures
The revised goods trade deficit in August stood at $21.65 billion, instead of the 10-month high of $24.2 billion reported earlier, and eased further to $19.37 billion in September. The overall goods deficit in the second quarter of 2023-24 is now $59.4 billion, just 5.6% over the first-quarter tally, belying economists’ fears that weaker trade balances originally reported for July and August may exacerbate the country’s current account deficit.
On a year-on-year basis, September’s goods trade deficit was 31% lower and narrowed the tally for the first half of the year to $115.9 billion, 17.7% lower than a year ago. This is because of a steeper 12.2% decline in imports between April and September 2023, in comparison to exports which are now down 8.8%.
Estimates for exports of services in September also indicated a mild 0.5% uptick, compared to a 0.4% decline in August. The final services exports numbers for these two months will be released by the Reserve Bank of India later.
Import bill down
“So far this year, oil exports have declined 17.5%, but non-oil exports have held up better and dropped only 6.3%,” said Bank of Baroda economist Aditi Gupta. However, non-oil and non-gold imports, a proxy for domestic demand, have remained weak and declined by 10% over the last year, she pointed out.
Top Ministry officials, however, stressed that the volumes of inbound shipments remained stable even as the year-on-year decline in prices of commodities, especially petroleum and edible oils, caused the import bill to dip in September. Lower prices also pared the value of petroleum exports, though shipment volumes were 22.1% higher between April and August.
Among major sectors, the exports of gems and jewelry, down 24.3% so far in 2023-24, were the worst hit, followed by chemicals (-15.8%) and textiles (-8.6%). Imports of gold, whose prices have risen 8% this year, are up 9.8%, and may rise further due to festive spending in this quarter.
Significance
The data released by the Commerce Ministry indicates a potential turnaround in India’s weak foreign trade performance. While goods exports have declined, the drop in imports was greater, resulting in a narrowing trade deficit. This indicates a possible improvement in India’s trade balance, which is crucial for the country’s economic growth and stability.
Features
The key features of the trade data include a record increase in goods exports in August, a significant decline in the goods trade deficit in September, and a steeper decline in imports compared to exports. These features suggest a positive shift in India’s trade performance.
Objectives
The objectives of analyzing and releasing trade data are to assess the health of India’s foreign trade, identify trends and patterns, and make informed policy decisions. The data helps policymakers and economists understand the impact of global and domestic factors on India’s trade performance and implement strategies to promote exports and control imports.
Effects
The decline in goods exports reflects the challenging global economic environment and the impact of the ongoing COVID-19 pandemic. However, the drop in imports suggests a slowdown in domestic demand, which can have implications for various sectors of the economy. The narrowing trade deficit is a positive development as it eases the pressure on India’s current account deficit and reduces the dependence on external financing.
Pros and Cons
Pros:
– The increase in goods exports in August indicates a potential recovery in India’s export-oriented industries.
– The decline in the goods trade deficit improves India’s trade balance and reduces the vulnerability to external shocks.
– The steeper decline in imports compared to exports suggests a possible moderation in domestic consumption, which can help control inflationary pressures.
Cons:
– The decline in goods exports signals a slowdown in global demand and highlights the challenges faced by Indian exporters.
– The weakness in non-oil and non-gold imports indicates a sluggish domestic economy and a potential slowdown in investment and consumption.
– The decline in exports of sectors such as gems and jewelry, chemicals, and textiles raises concerns about the competitiveness and resilience of these industries.
Fun Fact
India’s exports of petroleum products increased by 22.1% between April and August, despite lower prices. This suggests a higher volume of shipments, indicating a potential increase in global demand for Indian petroleum products.
Mutiple Choice Questions
1. What was the percentage decline in goods exports in September compared to the previous year?
a) 2.6%
b) 15%
c) 10.4%
d) 3.88%
Explanation: Goods exports declined by 2.6% from last September to hit a three-month low of $34.47 billion.
2. What was the percentage decline in imports in September compared to the previous month?
a) 2.6%
b) 15%
c) 10.4%
d) 3.88%
Explanation: Imports dropped by a sharper 15% to $53.84 billion in September.
3. What was the value of August’s goods exports after revisions?
a) $34.47 billion
b) $38.45 billion
c) $60.1 billion
d) $19.37 billion
Explanation: August’s goods exports were revised up by a record $4 billion to $38.45 billion, the highest in five months.
4. What was the revised goods trade deficit in August?
a) $24.2 billion
b) $21.65 billion
c) $59.4 billion
d) $115.9 billion
Explanation: The revised goods trade deficit in August stood at $21.65 billion, instead of the 10-month high of $24.2 billion reported earlier.
5. What was the percentage decline in imports between April and September 2023?
a) 12.2%
b) 8.8%
c) 6.3%
d) 10%
Explanation: Imports declined by 12.2% between April and September 2023.
6. What was the percentage decline in exports of gems and jewellery in 2023-24?
a) 24.3%
b) 15.8%
c) 8.6%
d) 9.8%
Explanation: Exports of gems and jewellery were down 24.3% so far in 2023-24.
7. What was the sector with the worst hit exports in 2023-24?
a) Gems and jewellery
b) Chemicals
c) Textiles
d) Gold
Explanation: The exports of gems and jewellery, down 24.3% so far in 2023-24, were the worst hit.
Note: The detailed explanations are given in the text provided.
Brief Summary | UPSC – IAS
India’s goods exports decreased by 2.6% in September, reaching a three-month low of $34.47 billion. However, the country’s weak foreign trade performance this year showed signs of improvement as imports dropped by a sharper 15% to $53.84 billion. August’s goods exports were revised up by a record $4 billion to $38.45 billion, the highest in five months, which reflected a 3.88% growth compared to the previous year. Despite this, sectors such as gems and jewellery, chemicals, and textiles continue to struggle. Oil exports declined by 17.5%, while non-oil exports only dropped by 6.3%.