The trade deficit for December 2022 has been revised down from $24.24 billion to $22.1 billion. File | photo credit: Reuters
India’s merchandise exports fell for the second consecutive month in January, with the value of shipments falling 6.6% to $32.91 billion, but the trade deficit narrowed to the lowest in a year to just $17.75 billion, thanks to a simultaneous drop in imports.
The Department of Trade and Industry has also heavily revised merchandise trade figures for December 2022, bringing the export figure from $3.6 billion to $38.07 billion, indicating a contraction of year-over-year of only 3% in this month, against 12.2% previously estimated. This is the biggest revision to export figures so far this year, followed by an upgrade of $3.1 billion for August 2022 and $2.85 billion for November 2022.
Imports, which fell 3.6% to $50.66 billion in January, were also revised up by almost $2 billion for December 2022, from a previously estimated $58.2 billion to $60.18 billion. December’s trade deficit has therefore been revised down from $24.24 billion to $22.1 billion.
Based on the revised figures, the sequential deceleration in exports and imports is quite significant through January, with outbound shipments falling 13.6% and imports falling 15.8% from December 2022 levels.
Cumulatively, merchandise exports rose 8.5% to $369.25 billion in the first 10 months of 2022-23, Commerce Secretary Sunil Barthwal pointed out, expressing optimism that “This growth momentum will continue despite strong global headwinds.”
Imports, on the other hand, increased by 21.9% between April 2022 and January 2023 to reach $602.2 billion. The ministry attributed this to the dichotomy of a slowing global economy and strong domestic growth despite external headwinds.
“It seems to have a two-way effect on Indian trade. On the one hand, it reduces exports as there is a decline in global growth, resulting in sluggish export demand, while on the other hand, it increases imports as domestic demand remains resilient due to relatively high growth,” he explained.
As many as 16 of India’s top 30 export products recorded declines, with handlooms, plastics and linoleum and jute products falling by more than 30%. Other labour-intensive sectors also reported a sharp contraction in exports, including carpets (-27.4%), gemstones and jewelry (19.3%), synthetic yarns ( -21.1%), crafts (-8%) and ready-to-wear (-3.5%).
Exports of engineering goods, which accounted for around a quarter of India’s exports in recent years, fell by almost 10%. By contrast, gold imports, which affect the current account deficit, fell 70.76 percent to just 0.70 billion in January, the ministry said.
“The significant decline in imports in January was partly due to a collapse in gold imports, but even oil shipments fell sharply, mainly reflecting the inventory adjustment, in our view, as it comes despite general energy price stability,” Barclays economists Rahul Bajoria and Shreya Sodhani said in a research note.
Non-oil and non-gold imports remained weak at $33.7 billion, suggesting lower commodity costs and somewhat lower demand for exports, they noted, expecting the trend is maintained.