India's Aug merchandise exports fall 1.2% YoY, imports see 36.8% rise

India’s merchandise exports declined in August this year to a nine-month low of $33 billion from $33.4 billion in August last year ($36.3 billion in July 2022). This was the first instance of a YoY contraction in 18 months.

The YoY decline was primarily led by non-oil exports, which dipped by 2.2 per cent to a 15-month low of $28.1 billion in August this year from $28.7 billion in the same month last year, partly reflecting the slowdown in external demand.

The $0.6 billion YoY decline in non-oil exports was mainly driven by engineering goods, followed by cotton (minus 32.3 per cent), gems and jewellery (minus 4.1 per cent), and textiles (minus 0.4 per cent).

India’s merchandise imports rose to $61.7 billion in August from $45.1 billion in the same month last year, remaining above $60 billion for the sixth consecutive month. The $16.6 billion YoY increase in merchandise imports was driven by oil imports.

The monthly average trade deficit trended higher at $29.3 billion in July-August 2022, relative to $23.5 billion seen in the first quarter (Q1) of this fiscal (FY23), with the sustenance of a robust domestic demand buoying imports, even as exports witnessed some moderation in the face of global slowdown fears, the rating agency said in a note.

Based on preliminary trends for July-August this year, and ICRA’s expectation for September, it projects the merchandise trade deficit at $82-84 billion in Q2 FY23, nearly twice as high as the year-ago levels, and a 17 per cent increase over the $71 billion estimated for Q1 FY23.

Consequently, the current account deficit (CAD) is projected to widen to an all-time high of close to $41-43 billion in Q2 FY23 from the $30 billion expected in Q1 FY23.

Overall, the CAD is projected to widen to an all-time high of $120 billion (minus 3.5 per cent of the gross domestic product or GDP) in FY23 from $38.7 billion (minus 1.2 per cent of GDP) in FY22.

ALCHEMPro News Desk (DS)