Editor's Pick: Goods trade deficit at 10-month high; exports decline

India’s foreign trade hit a fresh trough in August, with goods exports shrinking for the seventh successive month, services exports estimated to have dropped for the first time in well over a year, and the goods trade deficit hitting a 10-month high. The extent of decline in outbound shipments eased to 6.86% in August from double-digit contractions in recent months, to hit a three-month high worth $34.5 billion. Services exports, after growing at a sharp 26.7% rate in 2022-23, were reckoned to have shrunk 0.4% in August to $26.39 billion, stoking fears about a widening current account deficit in this quarter. The merchandise import bill for August dropped 5.23% year-on-year to $58.64 billion, but was 10.85% higher than July’s $52.9 billion import tally, lifting the goods trade deficit for August to $24.16 billion, just 2.8% below August 2022 numbers and almost 17% over July’s $20.67 billion gap. Aditi Nayar, chief economist and head of research at ICRA, said the sharp sequential uptick in imports in August had widened the trade deficit to a 10-month high. “With the monthly merchandise trade deficit averaging much higher during July-August vis-à -vis April-June 2023, India’s current account deficit is likely to widen in this quarter (Q2) from the $10-12 billion expected in Q1,” she cautioned. Nearly half of the decline in exports this year has been driven by the decline in petroleum prices, top officials said, noting that though export volumes of petroleum products were up 6% during April to July, prices were 27% lower than a year ago. “In fact, 13 commodities that accounted for about 23% of our exports in this period, have seen a rise in volumes despite a decline in the value of shipments, indicating there is strong demand for our products,” an official said. Commerce Secretary Sunil Barthwal said he was more optimistic now about export prospects than he was last month, with prices of commodities such as petroleum firming up, and green shoots becoming visible in the industry’s export order books. While demand from the European Union — where another interest rate hike was announced on Thursday — is likely to remain insipid, Mr. Barthwal pointed to the World Trade Organisation’s (WTO’s) projections of 2.4% growth in global trade in 2024 from the 1.7% estimated in 2023. “I hope exports will grow consistently from here… Global trade is looking up, especially in goods trade and items like automotives,” he said. In an editorial in July on India’s overall trend of exports in 2023-24, The Hindu had cited a Finance Ministry noting that frail global demand and tightening monetary policies could mean that the 6.5% growth hopes for the year could wobble. The Hindu’s Editorials Misplaced mystery: On the special session of Parliament, the politics Legal trouble, political gain: On the arrest of former Andhra Pradesh Chief Minister and TDP chief N. Chandrababu Naidu The Hindu’s Daily News Quiz Where is the National Institute of Virology in India? Mumbai Hyderabad Pune New Delhi To know the answer and to play the full quiz, click here. [logo] Editor's Pick 16 September 2023 [The Hindu logo] In the Editor's Pick newsletter, The Hindu explains why a story was important enough to be carried on the front page of today's edition of our newspaper. [Arrow] Open in browser [Mail icon] More newsletters Goods trade deficit at 10-month high; exports decline India’s foreign trade hit a fresh trough in August, with goods exports shrinking for the seventh successive month, services exports estimated to have dropped for the first time in well over a year, and the [goods trade deficit hitting a 10-month high](. The extent of decline in outbound shipments eased to 6.86% in August from double-digit contractions in recent months, to hit a three-month high worth $34.5 billion. Services exports, after growing at a sharp 26.7% rate in 2022-23, were reckoned to have shrunk 0.4% in August to $26.39 billion, stoking fears about a widening current account deficit in this quarter. The merchandise import bill for August dropped 5.23% year-on-year to $58.64 billion, but was 10.85% higher than July’s $52.9 billion import tally, lifting the goods trade deficit for August to $24.16 billion, just 2.8% below August 2022 numbers and almost 17% over July’s $20.67 billion gap. Aditi Nayar, chief economist and head of research at ICRA, said the sharp sequential uptick in imports in August had widened the trade deficit to a 10-month high. “With the monthly merchandise trade deficit averaging much higher during July-August vis-à -vis April-June 2023, India’s current account deficit is likely to widen in this quarter (Q2) from the $10-12 billion expected in Q1,” she cautioned. Nearly half of the decline in exports this year has been driven by the decline in petroleum prices, top officials said, noting that though export volumes of petroleum products were up 6% during April to July, prices were 27% lower than a year ago. “In fact, 13 commodities that accounted for about 23% of our exports in this period, have seen a rise in volumes despite a decline in the value of shipments, indicating there is strong demand for our products,” an official said. Commerce Secretary Sunil Barthwal said he was more optimistic now about export prospects than he was last month, with prices of commodities such as petroleum firming up, and green shoots becoming visible in the industry’s export order books. While demand from the European Union — where another interest rate hike was announced on Thursday — is likely to remain insipid, Mr. Barthwal pointed to the World Trade Organisation’s (WTO’s) projections of 2.4% growth in global trade in 2024 from the 1.7% estimated in 2023. “I hope exports will grow consistently from here… Global trade is looking up, especially in goods trade and items like automotives,” he said. In [an editorial]( in July on India’s overall trend of exports in 2023-24, The Hindu had cited a Finance Ministry noting that frail global demand and tightening monetary policies could mean that the 6.5% growth hopes for the year could wobble. 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