Trade deficit at 5-month low as textile exports surge, gold imports dip

In a sharp reversal of trends, India’s textile exports recorded a 17 per cent surge in September, as garment orders began shifting partially to India from conflict-hit Bangladesh. Over the last two years, garment and textile exports have struggled due to a slowdown in demand from the West.

India’s chief export promotion body, the Federation of Indian Export Organisations (FIEO), said that ongoing international trade disruptions, along with volatility in crude and metal prices, have played a key role in reducing the value of exports. “Rising tensions between Israel and Iran have led to logistical challenges impacting international trade, as much of our trade with Europe, Africa, CIS, and the Gulf region passes through the Red Sea or the Gulf,” FIEO President Ashwani Kumar said. Kumar noted that trade finance remains a significant challenge for MSMEs, as it affects the competitiveness of Indian products in global markets.

During a press briefing, Commerce Secretary Sunil Barthwal said that, despite the challenges, India’s exports in September remained positive. While engineering exports, which contribute to nearly a quarter of total exports, jumped 10 per cent in September, electronic exports rose 9 per cent. “We are working with the shipping ministry to assess the situation in West Asia and are engaging to increase Indian shipping capacity to prevent the negative impact of the conflict on Indian exports,” Barthwal said

The World Trade Organisation (WTO) had earlier this month reduced its growth forecast for the volume of global merchandise trade in 2025 to 3 per cent, down from 3.3 per cent, amid the escalating conflict in West Asia, which has blocked the crucial Red Sea shipping route for nearly a year. This follows a significant escalation of the year-long conflict in West Asia earlier this month, when Israel shifted its focus to Hezbollah, an Iran-backed militant group, by launching a military operation in Lebanon. This came after dramatic explosions involving pagers and walkie-talkies targeted Hezbollah members, as well as the assassination of its leader, Hassan Nasrallah.

The trade body warned that an intensification of the conflict in West Asia could have adverse consequences for global and regional trade flows, with effects also being felt in other regions. These may include “further disruptions” to shipping and rising energy prices due to higher risk premiums.

Official data showed that gold imports fell by 60 per cent, from $10 billion in August to $4 billion in September, bringing overall goods imports to $55 billion. FIEO Director General & CEO Ajay Sahai said traders often place orders in advance to prepare for the festive season, which could explain the bump in August.

Sahai said India’s declining petroleum exports could be a concern going forward, as petroleum exports in September dropped by a significant 26 per cent. “Prices have remained low despite the ongoing war in West Asia, as global fuel demand has been weak. This could be a concern for Indian exports in the future. The prices affecting India’s refined petroleum exports declined further after Israel stated it would not target Iran’s nuclear or oil sites,” Sahai said.

Engineering Export Promotion Council Chairman Arun Kumar Garodia said that engineering goods exports in the April-September 2024-25 period registered a growth of 5.3 per cent over the same period last year and have emerged as the primary drivers of overall shipments.

“Some engineering goods segments, such as industrial machinery and auto & auto components, have performed well so far in this fiscal year, but the metal sector’s performance has been below par due to pricing issues and logistics costs. Protectionist policies adopted by some countries have also affected metal exports from India,” Garodia said.

The Commerce and Industry Ministry, in a statement, said India’s top five export destinations in terms of growth in value in September 2024 compared to September 2023 were the Netherlands, the UAE, the US, Brazil, and Japan and the top five import sources, showing growth in value, were the UAE, China, Germany, Japan, and Taiwan.