Slowing petroleum exports drive India’s goods export lower by 9% in August; trade deficit widens to 10-month high of $30 billion

Official data showed that petroleum product exports slipped to $5.95 billion last month compared to $9.54 billion in August last year. Consequently, goods exports slipped to $34.71 billion compared to $38.28 billion August 2023 and imports increased to $64.36 billion. Ajay Srivastava, former Indian Trade Service officer and head of economic think tank Global Trade Research Initiative (GTRI), said that the sharp 38 per cent decline in India’s petroleum exports had significant impact on India’s total goods exports in August.

Srivastava said that the drop in petroleum product exports is linked to ongoing disruptions in the Red Sea since the crude oil prices have remained relatively stable between August 2024 and August 2023.

“If we exclude petroleum from the equation, merchandise exports for August 2024 show a slight increase of 0.05 per cent compared to August 2023. We must prepare for challenging times ahead, particularly for high-volume, low-value goods like low end engineering products, textiles, garment and other labour intensive products, as rising freight costs linked to longer shipping routes are likely to exacerbate the situation,” Srivastava added.

Trade data showed that imports of gold increased by 103 per cent to $10 billion last month compared to 4.9 billion in August 2023. Silver imports surged more than 7 times to $1.3 billion compared to $159 million in August 2023. Leather and leather product imports surged by 70 per cent, cotton imports by 40 per cent and pulses imports by 31 per cent.

As far as exports are concerned, spice exports surged 19 per cent despite several countries sounding alarm over high Ethylene oxide (EtO) levels. Electronic goods exports jumped 7.85 per cent and readymade garment (RMG) of textile exports also jumped 12 per cent. Amid concerns over Chinese slowdown, iron ore exports also slipped 55 per cent last month compared to August 2023. China is India’s largest importer of iron ore. Commerce Secretary Sunil Barthwal stated that India’s petroleum exports have been affected due to the decline in oil prices caused by the slowdown in China, even as this benefits imports. He also noted that global trade continues to face challenges, with the procurement of rough diamonds being affected by sanctions on Russia.

However, cumulative exports are rising, and a number of measures are being implemented, such as improving trade with African markets and not relying solely on advanced countries, which are experiencing a slowdown.

Barthwal told reporters that the government is focusing on services exports since the sector is not impacted by global conflicts. Services exports rose to $30.69 billion in August compared to $28.71 billion in August 2023.

The Ministry of Commerce and Industry is also collaborating with the Ministry of Shipping to resolve issues such as container shortages faced by exporters, he said. Federation of Indian Export Organisations (FIEO) president Ashwani Kumar said that such a sharp decline in merchandise exports has come amidst continuous global economic uncertainties coupled with drop in commodity prices and logistical challenges.

Kumar added that the ongoing international trade disruptions along with drop in crude and metal prices have also played a key role in bringing down the value of exports. “Some of the exporters have diverted to the domestic market as profitability in exports have taken a hit with a sharp rise in international freight (both ship and air),” Kumar said. “The performance would have certainly been much better had it not been for the significant decline in iron and steel exports. Over the past many months, the decline in iron and steel exports have been majorly responsible for the muted performance of engineering exports from India. This could be partly attributed to very competitive pricing from China, geopolitical conflicts in Europe and West Asia, and protectionist policies in the USA and EU,” EEPC India Chairman Arun Kumar Garodia said.

The World Trade Organisation (WTO) Goods Trade Barometer earlier this month said that global trade could improve in the second half of the year. However, shifting monetary policies in advanced economies and weakening export orders continue to create uncertainty.

The current value of the WTO Goods Trade Barometer, an early indicator of the trajectory of merchandise trade volume, stands at 103—above both the quarterly trade volume index and the baseline value of 100. “This suggests that merchandise trade has been picking up in the third quarter of 2024. However, the outlook remains uncertain due to shifting monetary policies in advanced economies and weakening export orders,” the WTO stated.

Following a flat period since the final quarter of 2022, world merchandise trade volume began to rise in the fourth quarter of 2023 and gained momentum in the first quarter of 2024, according to the global trade body.