Merchandise exports rose just 4.8% in September from a year before to $35.5 billion, as easing global commodity prices, on top of a slowdown in demand from key markets, continued to hurt order flow for a third straight month.
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Trade deficit, however, moderated a bit to $25.7 billion in September from a record $28 billion in the previous month, as import growth slowed, possibly reflecting a softening of pent-up domestic demand and a high base effect.
Still the record quarterly trade deficit of almost $84 billion in the three months through September will further pressure the current account, the deficit in which had hit a 15-quarter high in the June quarter.
According to the provisional data released by the commerce ministry on Friday, imports rose just 8.7% in September to $61.2 billion. Imports had grown 43.6% in July and 37.3% in August.
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Importantly, core exports (excluding the petroleum, gems and jewellery segments) contracted 4.6% in September from a year before to $24.2 billion, the worst monthly slide since May 2020.
Overall exports in the first half of FY23 touched $231.9 billion, up 17% from a year before, mainly due to decent performance in the first two months of this fiscal.
With global commodity prices moderating, export value will remain under pressure in the coming months. This will add to the woes of a demand slowdown in the US, EU, China and the UK. The country hasn’t quite gained from the rupee depreciation, as the currencies of some of its competitors have weakened against the greenback at a faster pace.
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However, domestic exporters and policy makers are pinning hopes on the diversion of a portion of western orders away from China, whose ability to ship out has been somewhat undermined by the fresh Covid outbreak there.
Data for high-value segments showed exports of electronics grew as much as 72% to $2 billion in September, followed by petroleum products (43% to $7.4 billion), gems and jewellery (17% to $3.8 billion). However, exports from labour-intensive sectors like textiles & garments and carpets dropped. Engineering goods exports contracted almost 11% to $8.4 billion. As for imports, the purchases of coal continued to rise sharply. In September, coal imports jumped 61% to $3.5 billion, even though oil and oil product imports showed a 5% decline to $15.9 billion. Interestingly, imports of iron & steel jumped 39% to $1.9 billion.
Aditi Nayar, chief economist at ICRA, said the non-petroleum and non-gems & jewellery exports have displayed a contraction, suggesting a “sombre outlook for exports” in the near term. FE
