India’s merchandise exports began 2024-25 on a mildly positive note, rising 1.07% to $35 billion in April. But the import bill jumped 10.25% to $54.1 billion, thanks to a surge in global oil and gold prices, lifting the trade deficit to a four-month high of $19.1 billion.
Almost all of the sharp 32.3% year-on-year surge in April’s goods trade deficit, compared to a $14.4 billion gap in April 2023, was fuelled by gold imports that tripled to $3.11 billion from $1.01 billion, and a 20.2% rise in the oil import bill amounting to $2.8 billion. The gold import bill in April was also more than double the previous month’s tally.
Most analysts were surprised and concerned by April’s trade tally and cautioned that the Rupee and the current account deficit could come under pressure if international oil and gold prices remain firm. Apart from oil and gold, 14 more commodities that figure in India’s major import items, reported an uptick in April, including pulses (up 172.3%), fruits and vegetables (27.7%), medicines and pharmaceuticals (18.4%) and electronics (10%).
17 items record contractions
On the other hand, as many as 17 of the top 30 export items recorded contractions in April, including engineering goods (-3.2%), gems and jewellery (-6.9%), leather (-7.2%), man-made yarn (-6.3%) and readymade garments (-1%). Several agricultural goods continued to see a drop in shipments, including rice (-4.8%), fruits and vegetables (-6.8%), while marine products fell almost 13%.
Commerce Secretary Sunil Barthwal expressed the hope that the positive growth for merchandise exports in the first month of the fiscal year is a good omen. “The World Trade Organisation has a slightly better growth projection for this year and we are hopeful that things will improve in the western world in terms of growth rates and inflation reduction, improving trade prospects,” he said.
The quick estimates for April showed petroleum exports grew 3.1% to $6.6 billion, electronic products surged 25.8% to $2.65 billion, while chemicals and pharma products rose 16.7% and 7.4%, with shipments worth $2.5 billion and $2.4 billion, respectively. These sectors, along with engineering exports which were $8.6 billion despite a dip, lifted the export tally, officials said.
Revised estimates
The Ministry also revised its estimates for total exports in 2023-24 to $778.2 billion from $776.7 billion estimated last month, reflecting a 0.42% uptick over the record figure of $776.4 billion achieved in 2022-23.
This revision was based on updated services exports numbers, now pegged at $341.1 billion in 2023-24, compared with $325.3 billion in 2022-23. Goods export estimates for 2023-24 remained unchanged at $437.1 billion, 3.1% below the record $451.1 billion tally a year earlier.
While last month’s services trade numbers will be available later, the Ministry projected that services exports had grown 14.68% in April to $29.6 billion, while imports had risen 21.5% to about $17 billion.
“India’s current account deficit [CAD] is expected to see an upward pressure in FY25 to beyond 1.0% from an estimated 0.8% in FY24, if oil and gold prices don’t cool soon enough. In the backdrop of volatile capital flows and uncertainty on Fed’s rate cut decision, this can push the Rupee closer to 84 against the U.S. Dollar earlier than expected,” said Suman Chowdhury, chief economist and head of research at Acuité Ratings & Research.
Mr. Chowdhury noted that India’s core exports and imports, excluding oil and bullion, have remained virtually stagnant since last April, reflecting the continuing challenges on the global trade front. Moreover, he flagged the loss in services exports momentum due to a slowdown in global IT services. “Net services exports are estimated to have slipped to $12.6 bn in April compared to the monthly average of $13.6 bn in 2023-24,” he said.
