Disclaimer: Copyright infringement not intended.

Context

• Recently, India’s quick trade estimates were released by the Commerce Ministry.

Details

• India’s merchandise exports increased for the third consecutive month in June, with a rise of 2.55% to $35.2 billion.
• The import bill saw a higher growth rate of 5%, reaching $56.2 billion.
• Consequently, the trade deficit widened by 9.4% from a year ago, according to quick trade estimates released by the Commerce Ministry on Monday.

Key Highlights

Record High in Merchandise and Services Exports

• Total Exports Record: The total merchandise and services exports achieved a record high of $200.3 billion in the first quarter of 2024-25, surpassing the previous record of $197.1 billion in 2022-23.
• Services Exports Estimate: The Commerce Ministry has estimated services exports for June at $30.3 billion, marking an 8.9% increase compared to the previous year.

Growth Prospects and Government Focus

• Positive Economic Trends: The global growth is improving, and inflation is trending downwards. These factors contribute to a positive outlook, suggesting that India could exceed $800 billion in total exports this year.
• Government Initiatives: The government is prioritizing six key sectors and targeting 20 countries to enhance export performance. This focused approach aims to boost India’s export growth despite global challenges.

Detailed Analysis

Quarterly Performance

• 2023-24 Performance: Total exports for the fiscal year 2023-24 were $778.2 billion, a slight increase of 0.42% over the previous year.
• Current Year Target: To reach the $800 billion mark this year, exports need to grow by 2.8%. However, officials acknowledge the presence of several uncertainties, including geopolitical risks.

Sector-Wise Performance in June

Export Analysis

• Top Growth Sectors: Significant contributors to the export growth in June included:
  • Engineering Goods: Up by 10.3%
  • Electronics Goods: Increased by 16.9%
  • Drugs and Pharmaceuticals: Rose by 9.9%
  • Chemicals: Up by 3.3%
  • Coffee: Saw a substantial increase of 70%
• Petroleum Exports: Experienced a decline of 18.3%, falling to $5.5 billion, while petroleum imports surged by 19.6% to $15.05 billion. Despite this, the oil deficit showed improvement from its peak of $13.2 billion in May, according to QuantEco Research.
• Declining Export Items: Ten of India’s top 30 export items recorded declines, including:
  • Handicrafts: -16.6%
  • Jute: -11.1%
  • Marine Products: -7.7%
  • Leather: -2.2%
  • Gems and Jewellery: -1.4%

Imports Analysis

• Gold Imports: Decreased significantly by 38.7% year-on-year, totaling $3.06 billion.
• Silver Imports: Conversely, silver imports surged by 377.4%, reaching $210.7 million.
• Electronics Goods Imports: Rose by 16% to $7.6 billion.
• Pulses Imports: Increased dramatically by 69.1%.

Trade Deficit and Economic Impact

• Q1 Trade Deficit: For the first quarter, the merchandise trade deficit expanded to $62.3 billion from $56.2 billion a year ago.
• Current Account Deficit: The widening trade deficit is likely to push up India’s current account deficit to about 1.4% of GDP from 1% in the same quarter a year ago. This marks a shift from the temporary surplus of 0.6% of GDP recorded between January and March 2024.

Industrial Output

• Growth in May: India’s industrial output grew by 5.9% in May, reflecting positive economic activity.

Conclusion

• India's trade data for June and the first quarter of 2024-25 show a mixed but overall positive trend.
• The steady growth in exports, particularly in engineering, electronics, and pharmaceuticals, indicates resilience in key sectors.
• However, the widening trade deficit and the mixed performance across various export items highlight the complexities of global trade dynamics.
• The government's strategic focus on key sectors and countries, along with the positive global economic trends, provides a cautiously optimistic outlook for achieving the ambitious export targets for the year.

MUST READ ARTICLE ON INDIA’S TRADE TRENDS: https://www.iasgyan.in/daily-current-affairs/indias-trade-trends

READ ALL ABOUT TRADE DEFICIT: https://www.iasgyan.in/daily-current-affairs/trade-deficit-33#:~:text=A%20trade%20deficit%20is%20an,a%20negative%20balance%20of%20trade.

PRACTICE QUESTION Q. Discuss the recent trends in India's trade performance, focusing on changes in export-import dynamics, key trade partners, and sectoral contributions. What measures should India adopt to enhance its trade competitiveness in the current global context?

SOURCE: THE HINDU