Driven by a rise in global demand for engineering and electronic products, India’s goods exports in December rose 1 per cent while the trade deficit narrowed to a three month low due to lower imports on the back of easing commodity prices, official data released by the commerce and industry ministry on Monday showed.
This is only the third instance in the ongoing financial year when the monthly goods exports have risen compared to last year as weak demand from the western countries and property crisis in China slowed global demand.
“India’s merchandise trade deficit printed at $19.8 billion in December 2023, lower than ICRA’s estimate of $22.7 billion, owing to a better-than-expected performance of exports in the month. Given this, we expect the Current Account Deficit (CAD) to print at $16-18 billion in Q3 FY2024, lower than our earlier estimate of over $20 billion, albeit nearly twice the reading seen in Q2 FY 2024,”Aditi Nayar, Chief Economist, Head Research and Outreach, ICRA Ltd said.
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However, services exports registered a steep fall of over 10 per cent to $27.88 billion in December compared to $ 31.19 billion last year.
This comes amid a decline in fresh export orders for Indian services firms amid demand slowdown from regions like Australia, Canada, Europe, West Asia and South America. As per HSBC India Services Purchasing Managers’ Index, fresh export orders for Indian services firms grew at the slowest pace in December since June 2023.
“There has been a major decline in the goods trade deficit. We are beating global trends and we hope to do the same in the last quarter of the ongoing financial year. But we are waiting and watching what is happening in the Red Sea region. There will be some negative impact because of the disruption and we will assess the impact next month,” commerce secretary Sunil Barthwal said during the press briefing.
Official data showed that goods exports jumped nearly 1 per cent to $38.45 billion in December from $38.05 billion compared to last year.
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Meanwhile imports slipped 4.85 per cent to $58.25 billion from $61.22 billion, taking the trade deficit to a three month low of $19.8 billion.
While engineering exports jumped 10.19 per cent, electronic exports surged 14.41 per cent and iron ore exports jumped a sharp 265.64 per cent, petroleum products exports slipped 17.71 per cent, textile exports declined 12.56 per cent and leather exports declined 10.84 per cent.
Gold imports in December jumped by a sharp 156.47 per cent to $3.03 billion compared to $1.18 billion in the year ago period.
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Director General of Foreign Trade Santosh Sarangi said that Increase in gold imports and gems and jewellery exports is partly explained by import of gold using advance authorisation scheme, doing value addition and re-exporting gold jewellery.
“Gold is coming through the advance authorisation route, largely gold bars, which is then going out after conversion into jewellery. In some cases they are taking advantage of the rupee Vostro account, RBI had allowed in July, 2022,” he said, adding that most of such imports are from the United Arab Emirates (UAE). However, he clarified that such a rise in imports could have happened with or without a trade deal between India and UAE.
“For engineering exporters, it has been quite a challenging time. Tensions in Europe and now in West Asia have caused a fair amount of downside risks. There are projections that global growth would slow down in 2024, and issues like high interest rate and low consumer spending would continue to bite this year as well,” Engineering Export Promotion Council of India (EEPC) India Chairman Arun Kumar Garodia said.