India’s goods exports suffered a blip last month after three months of growth that had triggered hope of a notable recovery from a patchy 2023-24 performance. July’s merchandise shipments’ tally of just under $34 billion marks a 1.5% drop from 2023 levels, but is also the weakest number since November 2023 and the second worst since October 2022. Although 18 of India’s top 30 export items clocked growth, including electronics (up 37.3%), readymade garments (11.8%) and handicrafts (13.2%), there was a significant drag from the rest. Petroleum exports dropped 22.2%, while gems and jewellery fell 20.4%, chemicals slipped 12%, and curbs on some food exports continued to hurt. This was accompanied by a tangible 7.5% rise in the import bill, fuelled by a 17.4% surge in petroleum imports, and a significant rise in consumer demand-driven ‘non-oil, non-gold’ imports such as electronics, pulses and vegetable oils. Gold imports fell 10.7% in dollar terms, but have hovered in the $3 billion-$3.4 billion range since April. With the Union Budget slashing import duties, gold imports could spike further. Moreover, silver imports that have been rising exponentially, mainly due to concessional duties offered under a trade pact with the UAE, shot up almost 440% in July, and are almost 202% higher in the first four months of 2024-25.
Of course, the combination of shrinking exports and growing imports spiked the trade deficit by almost 24% to $23.5 billion — a nine month-peak. Further upside risks remain, especially with domestic demand expected to hold up relative to the global demand for India’s exports. The Commerce Ministry still appears sanguine and believes India will surpass last year’s record export tally, factoring in robust services exports. But the outlook is uncertain, with existing and fresh geopolitical disruptions (Bangladesh) repeatedly flaring up, and freight cost surges making some exports unviable. A recent decline in commodity prices is another worry, especially with a decelerating Chinese economy, prompting its producers to flood global markets by undercutting prices. Global trade is expected to grow faster than 2023 but India must run harder to keep up, and actualise any gains. While the Centre’s steps to tap new markets are laudable, it would do better to offer more certainty for exporters on the fate of official schemes to boost their competitiveness, before global festive orders come up for bidding. A duty remission scheme, RoDTEP, has been extended only till September 30, while an interest subsidy scheme lapsed in June for large players and ceases this month for smaller firms. Inter-ministerial parleys for their continuation and even expansion, must be expedited so that exporters have greater visibility over longer timelines to do their operational math rather than last-minute surprises.
