By Dr. H A C Prasad
Performance of India’s Exports (Goods & services)
India’s Overall exports (goods & services) grew by 14.76% to US $ 776.38 billion in 2022-23 (April – March) powered by the 27.82% services export growth along with the 6.89 % merchandise export growth.
However, India’s Overall exports of $ 63.84 billion in September 2023 and $ 376.9 billion in the first half (April September) of 2023-24 are estimated by the Dept of Commerce, GOI, to register negative growths of (-)1.20 percent and (-)2.97 per cent respectively over the corresponding previous. This is mainly due to the negative growth in merchandise exports of (-) 3.1 per cent in September 2023 and (-) 8.77 percent in April-September 2023. Services exports grew marginally by 0.51 per cent in September 2023 and by a moderate 5.65 percent in April-September 2023.
The fall in merchandise exports and moderate growth of services exports in April-September 2023 is partly due to the base effect, as there was a high growth in merchandise exports (16.89 percent) and a high growth in services exports (27.26 per cent) in April-September 2022, which in turn is due to the post-covid pick up in exports.
Sector-wise, for merchandise exports, in the first half of 2023-24, there was negative export growth in important items, like Engineering goods (-2.82 percent), Petroleum products (-17.61 per cent), Gems & Jewellery (-24.31 per cent) and Organic and Inorganic chemicals (-15.16 per cent). Some export items with good/moderate positive growth are Electronic goods (27.62 per cent) and Drugs & Pharmaceuticals (5.02 per cent). Cotton yarn/ fabrics, made-ups, handloom products, etc., category also had a small positive growth (1.83 per cent).
Sector-wise services exports data for April-September 2023-24 are not yet available. So, any analysis can be done based on only the Q1 2023-24 Balance of Payments data of RBI along with the annual data for 2022-23. Post-covid recovery, services export growth was robust in 2021-22 at 23.50 per cent and continued to be robust even in 2022-23 at 27.82 per cent. However in 2023-24 Q1 and H1, it was just moderate at 5.89 per cent and 5.65 per cent respectively (Table 2). In 2023-24 Q1, good growth was registered in Travel exports (36.09 per cent), Business services (22.99 percent), Software services (10.70 per cent) and Financial services (13.86 per cent). But high negative growth was registered in Transportation (-24.77 per cent), which is also a reflection of the fall in merchandise exports; and also Communication services (- 13.54 per cent).
Performance of India’s Imports (Goods & Services)
Like exports, growth of Overall Imports (Goods & Services) was negative in the first half of 2023-24 at (-)10.14 per cent. This was due to the fall in both merchandise and services imports by 12.23 per cent and 1.50 per cent respectively.
Trade Balance
Overall trade deficit (Goods & Services) in the first half of 2023-24 nearly halved to (-) 39.91 US $ from (-)75.34 US $ in the corresponding previous period. This was due to the merchandise trade deficit becoming less negative at (-)115.58 billion US $ in the first half of 2023-24 compared to (-)140.83 billion US $ in the corresponding previous. Services trade balance also improved to 75.67 billion US $ in the first half of 2023-24 from 65.49 billion US $ in the corresponding previous period.
Trade Outlook
Though World Economy is projected to slowdown and World Trade volume growth is projected to decelerate sharply as per IMF in 2023, there are some positive signs as well.
The Baltic Dry Index (BDI), a shipping freight index reflecting both merchandise exports and shipping services performance was relatively low in 2023 till September 5 reaching 1063 on 5 September 2023. However since then, it suddenly jumped reaching a high of 1991 on 9 October 2023, though there was slight dip after that. This is an indication that both merchandise and shipping services could pick up in the World and also India.
The improving trade relations of India with other countries and the recent removal of trade barriers by India and US imposed earlier by them on each other are also positive signs.
The S & P Global India Manufacturing Purchasing Managers’ Index (PMI) is at 57.5 in September 2023, though it is slightly lower than the previous month’s 58.6. India’s Services PMI increased to 61.0 in September 2023 from 60.1 in August 2023. Thus, India’s services export performance could also be good along with good manufacturing exports.
The downside risks could however be the impact of a prolonged war in Gaza affecting the supply side, besides the weakened European economic growth which could affect the demand side.
