Merchandise exports drop 1.5% in July; trade deficit widens 23% to $23.5 billion

Expressing the possibility of a higher trade deficit in the subsequent months due to a reduction in gold import duty, economists said that July’s widening trade deficit comes amid a rise in crude prices and indicates a possible decline in the oil discounts offered by Russia.

“A widening in the oil and non oil deficit, expanded the merchandise trade deficit in July 2024 relative to July 2023. The higher oil import bill reflects higher volumes and global prices, as well as a possible decline in discounts. The value of gold imports has been rather steady at around $3-3.4 billion each month in April-July 2024,” Aditi Nayar, chief economist and head of Research and Outreach, ICRA said.

Data shared by the ministry showed that the imports of petroleum and crude products jumped 21 per cent to $65.37 billion between April to July this year compared to $53.66 billion during the comparable period last year. Exports of petroleum products, however, gained marginally during the period to $36.97 billion against $35.49 billion.

Commerce Secretary Sunil Barthwal said India’s exports have recorded a growth on a quarterly basis. He said that the growth rate is significant given the kind of protectionist policies are being followed by countries. “This is a very significant growth rate cumulatively,” Barthwal said. He said that the decline in goods exports in July is largely because of the slowdown on petroleum products exports and a jump in crude oil imports.

“The impact is largely due to our low exports of petroleum products and very high crude imports. Which also tells you that India is growing at more than 7 per cent rate of growth, and the world is growing at around 3 per cent rate of growth and therefore our consumption is going to grow more,” he said. Engineering Export Promotion Council of India Chairman Arun Kumar Garodia said that among the industry’s major headwinds are high sea freight rates, protectionist measures from major export partners, and weak demand in some key markets.

“The ongoing tensions in West Asia and its further escalation pose downside risks to external trade. The political unrest in neighbouring Bangladesh will also likely add to the problems,” Garodia said.

Engineering goods exports remained the top export item during the April to July quarter and engineering goods exports rose 3.6 per cent year-on-year to $9.03 billion in July 2024 from $8.72 billion in July 2023.

In cumulative terms, engineering goods exports grew 4.18 per cent year-on-year to $36.96 billion in the April-July period of 2024-25 as compared to$35.48 billion in the corresponding period last financial year.

Federation of Indian Export Organisations President Ashwani Kumar said that the marginal dip in merchandise exports by a little over 1 percent to $33.98 billion is because of the continuous international trade disruptions.

“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.

He added that had it not been these trade disruptions led by logistical challenges such as lack of container availability, shipping space, irregular shipping schedule and ships skipping Indian ports, the merchandise exports would have recorded yet another positive growth in exports that to double-digits during the month.