India's July Merchandise Exports Decline Amid Global Headwinds, Shrinking Demand
The Commerce Ministry attributes the export dip to a fall in demand in key markets like U.S. and Europe.
As global trade headwinds persist, India's merchandise exports declined again in July to $32.25 billion. India's trade deficit, however, modestly improved to $20.7 billion, largely on account of a fall in oil exports as non-oil and non-gold exports have continued to hold up.
According to officials of the Commerce Ministry, the export decline in India stems from shrinking import demand in key consumer markets like the United States and Europe.
"It appears that global headwinds are still there. Most countries are reporting very negative export and import growth ... The fall in our exports is not as much as elsewhere," said Commerce Secretary Sunil Barthwal while speaking to the media during the July release of trade data.
The ministry is hoping that the headwinds will decline as the year progresses and that there will be better prospects in the second half of the year.
India's export figures fall in line with global trade sentiments in what is expected to be a slow growth year weighed down by the effects of the war in Ukraine, high inflation, monetary policy tightening, and financial market uncertainty globally.
The World Trade Organisation expects trade growth to slow to 1.7% in 2023, according to its forecast on April 5. The estimate was an upgrade from a previous 1% forecast made in October 2022, which was positively upgraded as Covid-19 pandemic controls relaxed in China. This was expected to unleash pent-up consumer demand in the country and, in turn, boost international trade.
The lingering effects of Covid-19 and the rising geopolitical tensions were the main factors impacting trade and output in 2022, and this is likely to be the case in 2023 as well. Interest rate hikes in advanced economies have also revealed weaknesses in banking systems that could lead to wider financial instability if left unchecked. Governments and regulators need to be alert to these and other financial risks in the coming months.Chief Economist Ralph Ossa, WTO
Additional Secretary Satya Srinivas said that India's export decline in particular stems from a shrinkage of imports in consumer economies like the U.S. and Europe, leading to an export decline in India.
Import demand data shows that the U.S. has seen a decrease in its import appetite since February. Other export destinations for India like Europe, Japan, Korea, and China also show shrinking import appetites, which reflects on Indian merchandise export data.
Of the top 10 merchandise export source destinations, the United Kingdom stood out as the only country to see a rise in export value on a year-on-year basis, as exports with other countries hovered around the same figures as the previous year or declined.
Export trade with the U.K. stood at $3.74 billion as of April–July 2022, whereas this rose to $4.51 billion in the corresponding period of April–July 2023. The biggest export items to the U.K. from India include electronics like smartphones, nuclear equipment, mineral oils, and apparel.
In terms of the export outlook for the year, Barthwal told the media that India is hopeful of exporting more than it did last year in terms of goods and services.
India's exports of goods and services came to $770 billion in FY23. While the government has not set a specific target for FY24, it hopes to achieve the milestone of $2 trillion by 2030.
