News Highlight:
- The government is optimistic that domestic demand will counter the effects of India’s declining exports
- Recently, in October month, India’s exports fell 16.7% year on year. India exported nearly 17% less in October this year than it did in October 2021.
Key Takeaway:
- India exported goods worth $29.78 billion in October, compared to $35.73 billion in October 2021.
- Leading up to October, India’s exports increased by 8.4% in July, 10.4% in August, and 4.6% in September.
Reason for the decline in Global Economic Growth:
- Persistently high inflation:
- The drop in exports in October reflects weaker global demand.
- Global economic growth is slowing sharply as a result of persistently high inflation in developed countries,
- which has resulted in a sharp tightening of monetary policy (read higher interest rates) by almost all central banks.
- Expecting Recession:
- With global growth slowing — the UK and US are expected to enter recession
- while the eurozone is expected to stall even as China struggles to grow — demand for Indian goods has plummeted.
- As a result, exports have decreased.
- Oil and Non-Oil export:
- Oil export growth fell to -11.4% year on year from 43.0% in September, reflecting lower global crude oil prices.
- while non-oil exports fell -16.9% year on year, with the drop encompassing iron ore, handicrafts, textiles, some agricultural goods, plastics, gems & jewellery, engineering goods, chemicals, pharmaceuticals, and leather goods.
- India’s export weakness:
- India’s export weakness is likely to persist as global growth remains weak.
- Weaker exports, in turn, will dampen India’s GDP growth (GDP).
India’s current scenario:
- India’s exports:
- India’s exports entered negative territory after a gap of about two years
- Key export sectors recorded negative growth during October, including gems and jewellery, engineering, petroleum products, ready-made garments of all textiles, chemicals, pharma, marine products, and leather.
- Export declined sharply by 16.65 per cent to USD 29.78 billion in October, mainly due to global demand slowdown, even as the trade deficit widened to USD 26.91 billion, according to data released by the commerce ministry recently.
- Export sectors that recorded negative growth included gems and jewellery (21.56 per cent), engineering (21.26 per cent), petroleum products (11.28 per cent), ready-made garments of all textiles (21.16 per cent), chemicals (16.44 per cent), pharma (9.24 per cent), marine products (10.83 per cent), and leather (5.84 per cent).
- India’s Imports:
- Oct Month Import:
- Imports during the month under review rose by about 6 per cent to USD 56.69 billion on account of increase in the inbound shipments of crude oil and certain raw materials such as cotton, fertiliser and machinery.
- Total Imports:
- Total Imports rose 33.12 per cent to USD 436.81 billion.
- Merchandise deficit:
- The merchandise trade deficit for April-October 2022 was estimated at USD 173.46 billion as against USD 94.16 billion in April-October 2021.
- Trade deficit:
- Trade deficit in October 2021 was USD 17.91 billion. Last time it was in November 2020, when exports contracted by 8.74 per cent.
- Oct Month Import:
Importance of Export:
- Exports are a key driver of growth in any economy.
- It has the potential to influence a country’s GDP, exchange rate, inflation rate, and interest rates.
- A strong export data set is advantageous because it increases job opportunities, foreign currency reserves, manufacturing, and government revenue collection.
- It is also a good way for a country to get out of a slump.
- Furthermore, it plays an important role in strengthening domestic manufacturing units by increasing their quality, allowing India-made products to compete and stand out against global peers.
Pic Courtesy: The Hindu
Content Source: The Hindu