News highlights:
- According to Commerce Ministry, tentative global demand pulled India’s goods exports down 8.8% in February to $33.9 billion, while imports fell 8.2% from a year ago to $51.31 billion.
- The trade deficit, the difference between imports and exports, stood at $17.43 billion in February 2023.
Key findings:
- Trade deficit
- The data shows that the trade deficit for merchandise goods has risen by 43 per cent to $248 billion for April-February of the current fiscal year, up from $173 billion in the same period last year.
- This increase can be attributed to a rise in the value of imports, particularly in the areas of petroleum, gold, and electronics.
- The trade deficit is a critical concern for India as it impacts the country’s foreign exchange reserves and can lead to an increase in the current account deficit.
- The government has been taking measures to address the trade deficit, such as promoting exports, reducing import dependency, and increasing domestic production.
- Oil exports:
- Both oil and non-oil exports contracted.
- Oil exports fell sharply by 28.8%, while imports went below the $52 billion mark.
- Gold imports:
- Gold imports dropped almost 45% from February 2022 levels to $2.63 billion, this constituted a 277% month-on-month jump from January’s imports of the yellow metal.
- India’s total goods exports:
- For the first 11 months of 2022-23, India’s total goods exports now stand at $405.94 billion, 7.55% higher than in the same period of 2021-22.
- Total Imports:
- Imports grew 18.82% over the same period to $653.47 billion from about $550 billion a year ago.
Sector-wise Analysis in Export:
- Engineering goods:
- Engineering goods were the largest contributors to the growth in exports, growing at nearly 50 per cent and expected to hit $110 billion by the end of FY2022.
- Electronics goods
- Electronics goods exports rose by 42.8 per cent in the first 11 months of the fiscal.
- Petroleum products
- The export of petroleum products grew by 147.6 per cent, driven by a steady increase in crude oil prices.
- India’s single largest export item (processed petroleum), alone has a 15 percent share in the country’s overall exports.
- Agri Exports
- India’s agriculture and allied exports have grown at 24 percent in the first 10 months of the current financial year.
- Exports were boosted by an increased access to markets in the US, European Union and the United Arab Emirates, and targeted efforts by the government to expand the global reach of processed food from India.
- A range of new products has also been shipped abroad for the first time in FY22.
- They include fresh vegetables and mangoes from Varanasi, black rice from Chandauli, oranges from Nagpur, bananas from Theni, bhoot jolokia chilli from Nagaland, red rice from Assam and millet from Himachal Pradesh, among others.
- The government has also significantly pushed exports of processed items such as honey, cocoa, fruit jams, and wine, in which India hasn’t shared global expertise till now.
- India has now become the ninth-largest honey exporter in the world, shipping out 7.36 lakh tonnes in the previous financial year. The US is the largest buyer, at 80 percent.
- Gems and jewellery
- Gems and jewellery, the second-largest export category for India, also saw a major rise in earnings.
- Overall, exports in this sector rose to an unprecedented $32 billion, representing almost 10 percent of India’s exports.
- In 2020, total global exports of the gems and jewellery industry amounted to $693 billion.
- With a share of 3.5 percent, India ranked 7th on the list.
Way Forward:
- The weakness in India’s exports is likely to sustain because global growth is likely to remain weak. Weaker exports, in turn, will have a dampening effect on the growth of India’s gross domestic product (GDP).
- The government urgently needs to bring out a revised foreign policy to address both our historical trade imbalance, and the slowing of exports, rather than wait out the tumult as it intends to, having again deferred the new policy release till April next.
- The government should take appropriate measures to improve the credit cycle through investment and savings and promotion of foreign investment will bring the economy from slowdown in future.
Pic Courtesy: Freepik
Content Source: The Hindu