India's merchandise trade deficit has widened to $19.1 billion in April, 2024 despite rise in exports, which rose just over 1 per cent to 35 billion, while imports increased over 10 per cent to $54.1 billion. This was the highest merchandise trade deficit print in four months, the primary reason behind a wider trade deficit in April 2024 on a year-on-year basis is a three-fold increase in the gold imports to $3.11 billion versus $1.01 billion in the same month during the last fiscal, indicating that institutions and individuals as well as traders possibly purchased more gold leading to the surge in gold imports.
In addition to this higher crude oil imports rose over 20 per cent to $16.5 billion, Electronics, the second biggest component of India’s import bill increased by 10 per cent to $7 billion. Apart from gold, oil and electronics, India's other major import items that reported an uptick in April, includes pulses (up 172.3 per cent), fruits and vegetables (27.7 per cent), medicines and pharmaceuticals (18.4 per cent), however 14 of the 30 selected commodities including coal, pearls, precious and semi-precious stone (-21.12 per cent), and fertilisers - crude and manufactured (-8.3 per cent) witnessed a contraction in imports.
On the other hand, in merchandise exports as many as 17 of the top 30 export items recorded contractions in April, including engineering goods (-3.2 per cent), gems and jewellery (-6.9 per cent), leather (-7.2% per cent), man-made yarn (-6.3 per cent) and readymade garments (-1 per cent). Several agricultural goods continued to see a drop in shipments, including rice (-4.8 per cent), fruits and vegetables (-6.8 per cent), while marine products fell almost 13 per cent.
However, 13 of the 30 key sectors exhibited positive growth in April 2024 as compared to same period last year (April 2023), with electronic goods being the top performer as exports logged to $2.7billion (25.8 per cent), tea (25.74 per cent), drugs and pharmaceuticals (7.4 per cent growth to $2.4 billion) and chemicals (16.8 per cent rise to $2.5 billion) were the other major gainers.
The total value of merchandise imports stood at $54.09 billion in April, higher than the $49.06 billion imports recorded during the same period of the previous year. During, March 2024, merchandise imports stood at $57.28 billion. The quick estimates for April presents that, the petroleum exports growth by 3.1 per cent to $6.6 billion, electronic products surge by 25.8 per cent to $2.65 billion, while the rise of chemicals and pharma products by 16.7 per cent and 7.4 per cent, with shipments worth of $2.5 billion and $2.4 billion, respectively. These sectors, along with the exports of engineering goods which were registered at $8.6 billion despite a dip, lifted the export tally.
India, the world's third-biggest consumer of oil, imported $16.46 billion of oil in April compared with $17.23 billion in March and $13.69 billion in April 2023. Meanwhile, services exports stood at $29.57 billion, up from $25.78 billion in the previous month. Service exports had stood at $28.54 billion in March 2023. Services imports rose to $16.97 billion in April 2024 from $13.96 billion in the same period of the previous year.
Service imports had stood at $15.84 billion in March 2024. During April, the main drivers of merchandise export growth included electronic goods, organic and inorganic chemicals, petroleum products, drugs and pharmaceuticals, cotton yarn and handloom products, the commerce ministry said in a presentation. However, overall export of engineering goods, iron-ore, gems and jewellery, and marine products declined during the month.
Indian exports have been impacted by a slowdown in global growth. The tightening of interest rates due to nagging inflation, especially in advanced western economies, has led to a slowdown in business, investment and trade. A slow pace of pickup in global trade during 2024, following a contraction in 2023, driven by the lingering effects of the high energy prices and inflation, also impacted the exports. The ongoing geopolitical challenges like conflicts in West Asia and Ukraine, Israel-Hamas Conflict and the Red Sea crisis have also had the negative impact on the global trade and has made international trade scenario tough for the Indian exporters too.
The Revised Estimates
The Ministry of Commerce also revised its estimates for total exports in 2023-24 to $778.2 billion from $776.7 billion estimated during the last month, reflecting a 0.42 per cent uptick over the record figure of $776.4 billion achieved in 2022-23. This revision was based on updated services exports numbers, now pegged at $341.1 billion in 2023-24, compared with $325.3 billion in 2022-23. Goods export estimates for 2023-24 remained unchanged at $437.1 billion, 3.1 per cent below the record $451.1 billion tally a year earlier.
The Ministry projection of the services trade presents that, services exports had grown by 14.68 per cent in April to $29.6 billion, while imports had risen 21.5 per cent to about $17 billion.
India's current account deficit [CAD] is expected to see an upward pressure during the FY25 to beyond 1.0 per cent from an estimated 0.8 per cent in FY24, if oil and gold prices don't cool soon enough. Given the backdrop of volatile capital flows and uncertainty on (Federal Reserve Bank) Fed's rate cut decision, this can push the Rupee closer to 84 against the U.S. Dollar earlier than expected.
India's core exports and imports, excluding oil and bullion, have remained virtually stagnant since last April, reflecting the continuing challenges on the global trade front. Moreover, there has been the loss in services exports momentum due to a slowdown in global IT services. The, Net services exports are estimated to have slipped to $12.6 billion in April compared to the monthly average of $13.6 billion in 2023-24.
The fluctuations in the international commodity prices has been largely impacting overall global trade patterns owing to issues that have been noted in the international transportation and logistics due to geopolitical tensions. However, the World Trade Organisation has a slightly better growth projection for India, this year and is hopeful that once the things would improve in the western world in terms of growth rates and inflation reduction this would improve the trade prospects.
With the projection of better growth numbers with improved demand from the markets of European Union (EU), United Kingdom (UK), West Asia and USA the future growth is bright for Indian exports. And the need of the hour is to take steps on the liquidity front with deeper interest subvention support and continuation of schemes like the interest equalisation scheme that provide boost to the manufacturers and merchant exporters.
