Exports fall 1% in August to $33 billion; trade deficit remains elevated

"Conservative" merchandise export target set at $450 billion in FY23, says commerce secretary. Department's internal target remains $470 billion

Outbound shipments from India grew at the slowest pace at $33 billion in August -- down 1 per cent compared to past year -- according to preliminary data released by the government on Saturday.

Exports restrictions on items, such as wheat, steel, iron pellets, as well as a delay in execution of orders due to fear of slowdown in developed economies, have led to a flattening of exports. On a sequential basis, exports fell 9 per cent from $36.27 billion in July.

On a cumulative basis, India exported goods worth $192 billion during April-August period, up 17.1 per cent year-on-year (y-o-y).

Trade deficit eased to $28.68 billion, but remained elevated in August. In July, the deficit had hit a record high of $30 billion. Similarly, imports remained elevated at $61.68 billion in August, 45.09 per cent y-o-y, as India “stocked up” coal and petroleum products for energy security, commerce secretary BVR Subrahmanyam told reporters.

On a sequential basis, the value of inbound shipments declined by 7 per cent.

Based on the current trends, and on a conservative basis, Indian exports will cross $750 billion in FY23, compared to $676 billion in FY22. A ‘conservative’ target of $450 billion has been set for the merchandise exports, the commerce secretary said, adding that the department’s internal target remains at $470 billion.

“Crude and coal dominated the increase in imports, in line with the trend in recent months. The y-o-y dip in exports, led by sectors such as engineering goods, gems and jewellery, and yarns and textiles, suggests a cautious outlook for external demand going ahead,” said Aditi Nayar, chief economist, ICRA.

Subrahmanyam highlighted that given the current global scenario, India is not in an uncomfortable position. However, there are headwinds related to the conditions in developed nations and Christmas orders, he added.

“Exporters’ order books are full, but the orders are getting delayed in terms of execution. They have not been asked to ship. That is the uncertainty that is there,” he said.

There was a contraction in some of the key drivers of export growth in India. Engineering goods witnessed a 14.59 per cent contraction, gems and jewellery by 4.08 per cent, and cotton yarn by 32.32 per cent, amid tepid demand from Western nations. However, some items witnessed growth. Petroleum products grew at 9.18 per cent, chemicals 8.03 per cent, electronic goods 46.09 per cent, and rice 30.88 per cent.

For a number of global factors, growth in engineering goods exports has come down in the last few months, said Mahesh Desai, chairman, Engineering Export Promotion Council of India.

“Decline in demand from China and recessionary trends in major economies in the West have contributed to the slowdown in exports. The pace of growth also slackened due to export duty on certain steel products including stainless steel products,” Desai added.

He further said, “At this point, a fair amount of uncertainty remains due to the looming recession in major economies in the wake of ongoing Russia-Ukraine conflict. Depending on the extent of recession, Indian engineering exporters would be impacted but it is likely to more hit the MSMEs which have grappled with back-to-back challenges such as Covid crisis and the subsequent spike in raw material prices.“