Mar trade deficit at 11-mth low; FY24 goods exports shrink 3%

INDIA’S GOODS exports declined marginally by 0.7 per cent year-on-year (y-o-y) in March amid weak global demand and ongoing geopolitical conflicts, while imports fell by a sharper 6 per cent largely due to lower gold imports narrowing the overall trade gap to an 11-month low of $15.6 billion, data released by the Ministry of Commerce and Industry on Monday showed.

For the full financial year 2023-24 (FY24), merchandise exports slid 3.1 per cent and imports contracted 5.4 per cent amid measures taken for import substitution and curtailing unessential imports taking the overall trade gap to $240.18 billion compared to $264.9 billion in 2022-23, ministry officials said. Meanwhile, the trade gap in March 2023 stood at $18.96 billion.

Lower goods exports during FY24 comes at a time when global goods trade remained weak amid declining goods demand, particularly in the west. The volume of global trade also slipped 1.2 per cent in 2023 due to lingering effects of high energy prices and inflation globally, as per the World Trade Organization.

Moreover, exporters have flagged that the recent tensions in West Asia, especially the threat for consignments routing

through the Red Sea has further added to woes of the exporting community, as the freight rates along with the insurance cost have gone up extremely high, with the burden of various surcharge.

Federation of Indian Export Organisations (FIEO) President Ashwani Kumar raised concern that much will depend on the new contracts to be signed with buyers during the new fiscal as the exporters have been absorbing the burden of increased freight cost as per the old agreement.

“Led by a larger y-o-y decline in merchandise imports vis-à-vis such exports, India’s merchandise trade deficit eased to an 11-month low of $15.6 billion in March 2024, while also trailing the levels seen in the year-ago month, amid a halving of gold imports and a fall in nonoil non-gold imports. This is expected to augur well for the current account number in Q4

FY24, which may witness a small, transient surplus of $1-2 billion in the quarter,” Aditi Nayar, Chief Economist Head Research & Outreach said.

The official data showed that exports of engineering goods, drugs and pharmaceuticals and iron ore recorded y-oy growth of 2.13 per cent, 9.67 per cent and 117.74 per cent, respectively, during FY24.

Exports of electronic goods also jumped sharply by 23 per cent during FY24.

However, exports from the labour intensive sector continued to struggle. While the exports in the leather and leather products slipped by 9.89 per cent, exports in the gems and jewellery category slipped by a sharp 13.83 per cent in FY24 compared to FY23, data showed.

India’s exports of readymade garment (RMG) of all textiles also registered a steep decline of 10.25 per cent during FY24 compared to the previous fiscal. “This was an extremely difficult year from a trade point of view because not only the Ukraine-russia conflict continued, other conflicts also came up. There was a huge issue with respect to the Red Sea, Panama canal and there were recessionary trends which are well documented…we have beaten all odds. We have surpassed the overall merchandise plus services figure. There is also a huge decline in the trade deficit,” Commerce Secretary Sunil Barthwal said during the press briefing.

Barthwal added that the exports have now moved towards a “positive cycle of growth” from this calendar year onwards. Commerce Ministry estimates suggested that services exports shrank 6.2 per cent in March to $28.5 billion, while imports dropped 6.6 per cent to $15.8 billion. However, overall services exports are estimated to have jumped 4.4 per cent in 2023-24 to nearly $340 billion, while imports dropped 2.5 per cent to $177.6 billion, the ministry said.

On the imports front, ‘petroleum, crude & products’ fell sharply by 14.23 per cent to $179.62 billion during FY24, with 4.4 per cent decline seen during March. While gold imports more-than-halved to $1.53 billion in March 2024 from $3.3 billion in March 2023, for the full year, they rose 2.72 per cent to $45.54 billion.