Opinion Express View on export data: Trade ups and downs

After falling in November last year, India’s merchandise exports picked up marginally in December. As per data released by the Ministry of Commerce and Industry this week, goods exports stood at $38.45 billion in December 2023, up 1 per cent over the same period the year before. Stripping away petroleum exports, core non-oil exports grew at a higher 6 per cent. Alongside, the country’s imports continue to fall, declining by 4.9 per cent in December. This combination of a mildly positive export growth and falling imports has led to the merchandise trade deficit narrowing to $19.8 billion in December, down from $20.6 billion in November. As a consequence, analysts at Nomura expect the current account deficit to touch around 1.6 per cent of GDP in the quarter.

In December, of the 30 key merchandise sectors, 17 showed positive export growth. Exports of electronic goods grew at a healthy 14.4 per cent, engineering goods by 10.2 per cent, and gems and jewellery by 14 per cent. For the year so far (April-December), while aggregate exports are almost 6 per cent lower than over the same period last year, 14 sectors have shown positive growth, with sectors like electronic goods and drugs and pharmaceuticals showing healthy performance. The former has grown by 22 per cent, while the latter has registered a growth of 8.2 per cent. On the other hand, even as imports on aggregate have declined by almost 8 per cent in the year so far (April-December), they remain healthy in segments such as iron and steel, non-ferrous metals, machinery and machine tools, electronic goods and gold.

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Global trade is facing tremendous uncertainty due to the Houthi attacks in the Red Sea. The consequent increases in transportation costs, insurance premiums and the time involved — as per reports a substantial number of vessels are now being rerouted through the Cape of Good Hope — are likely to adversely impact India’s exports, especially to Europe which accounts for around 15 per cent of the country’s merchandise exports. As per the commerce ministry, around 80 per cent of the outbound shipping to Europe takes place through the Red Sea region. The full impact of these attacks in the Red Sea will only be visible in weeks and months ahead. However, if India’s exports are sharply impacted, the merchandise trade deficit could widen more than currently expected in the last quarter of the financial year.