Turning tide: On the export rebound

From a reasonably healthy show at the onset of this financial year, India’s goods exports had stumbled sharply in the second quarter, shrinking an average 5.8% over the first two months and rising a mere 0.5% in September. With half the year gone by, exports were up just 1%. In this backdrop, the 17.25% surge in merchandise shipments to overseas markets through October is a positive surprise, with the year’s second-highest tally of $39.2 billion. Trade mandarins have attributed the uptick to stronger demand for the Christmas season in developed markets. If this festive demand holds, at least the next couple of months should see healthy numbers. With services exports rising 14.6% by September, official hopes of cumulative exports through 2024-25 crossing a record $800 billion may yet be attained. Non-petroleum exports led the way in October with a 25.6% rise, and such shipments have now hit the highest ever tally for the first seven months of a year, at $211.3 billion.

The petroleum story, however, is starkly different and a tad puzzling. India’s oil imports rose 13.2% in October to $18.3 billion (almost 46.4% over September), while exports tanked for the fifth straight month, by over 22% to $4.6 billion, the lowest in almost three years. The oil trade deficit has hit a record $13.7 billion. While one can attribute the export slide to significantly lower global oil prices vis-à-vis last year, the same should have held true at least partly for the import bill as well, even if higher domestic demand is factored in. The oil influx spike has also lifted the overall import bill to a fresh high of $66.3 billion, breaking this August’s tally of $64.3 billion, which was fuelled by gold imports. Over the past three months, the trade deficit has widened to its second- and third-highest level. While gold imports are likely to stay high till the wedding season ends, oil trends and the widening import bill warrant closer monitoring even if the foreign exchange reserves situation is comfortable, and adequate to cover about a year’s imports. The World Trade Organization has pegged global trade growth at 3% in 2025, relative to a 2.7% estimate for this year. Apart from the slowdown in China and festering conflicts around the world, the biggest fly in the ointment for all such hopes is likely to be the incoming United States administration, with Donald Trump expected to prioritise the elevation of import tariffs and sops for domestic production. India must avoid any policy gestures such as the updated laptop import management system — it is in the works, with possible curbs — that could draw the U.S. government’s focus away from Mr. Trump’s primary trade target — China.