India’s merchandise exports saw a decline of 1.5% in July 2024, amounting to $33.98 billion, as reported by the Ministry of Commerce and Industry. This decrease in exports is attributed to rising freight rates and a patchy recovery in global demand. Concurrently, the trade deficit for July widened significantly by 23%, reaching $23.5 billion.
Key Factors Behind the Decline
- Increased Imports:
Imports surged by 7.45% to $57.48 billion in July, compared to $53.49 billion in the same month last year. This sharp increase is primarily due to higher imports of crude oil and gold. - Rising Crude Oil Prices:
The rise in crude oil prices, combined with a potential reduction in discounts offered by Russia, has contributed to the increased import bill. The value of petroleum imports jumped by 21% between April and July 2024, reaching $65.37 billion. - Stable Gold Imports:
Gold imports remained relatively stable at around $3-3.4 billion each month from April to July 2024.
Expert Insights
Economists have suggested that the widening trade deficit could persist in the coming months due to ongoing high crude oil prices and a reduction in gold import duty. Aditi Nayar, Chief Economist at ICRA, noted that the increase in both oil and non-oil deficits contributed to the expanded merchandise trade deficit.
- Commerce Secretary’s Comments:
Commerce Secretary Sunil Barthwal highlighted that while there was a quarterly growth in exports, the decline in July was due to lower petroleum product exports and higher crude oil imports. He emphasized that India’s consumption is growing at a faster rate compared to global growth. - Challenges Facing Exporters:
Arun Kumar Garodia, Chairman of the Engineering Export Promotion Council of India, pointed out major challenges such as high sea freight rates, protectionist measures by export partners, and weak demand in key markets. Political unrest in neighboring Bangladesh and tensions in West Asia are also seen as potential risks.
Sector-Specific Performance
- Engineering Goods Exports:
Despite the overall drop, engineering goods exports showed growth. These exports increased by 3.6% year-on-year in July, reaching $9.03 billion. Cumulatively, engineering goods exports rose 4.18% from April to July 2024. - Impact of Trade Disruptions:
Federation of Indian Export Organisations President Ashwani Kumar attributed the minor dip in merchandise exports to international trade disruptions and logistical challenges. He noted that without these issues, exports could have seen double-digit growth.
Conclusion
India’s trade figures for July 2024 reflect a challenging environment for merchandise exports, marked by a notable drop in export values and a significant increase in the trade deficit. The combination of rising import costs and persistent global trade disruptions continues to impact India’s trade balance, underscoring the need for strategic adjustments in trade and economic policies.
