April-Nov 2023 Trade Deficit improves by 40%

By: Damini Mehta

Merchandise exports came down from USD 298.21 billion in April-November 2022 to USD 278.80 billion in 2023.

A decline in imports in the months of April- November 2023 has contributed to a near 40% fall in India’s overall trade deficit compared to the same period last year. Merchandise exports came down from USD 298.21 billion in April-November 2022 to USD 278.80 billion in 2023. The decline in exports was supported by a drop in merchandise imports of India by about USD 42 billion to USD 445.15 billion in 2023.  On the other hand, exports in services saw a growth of nearly 6% to USD 220.66 billion. Services imports supported this growth in exports of services with a 3% negative growth totaling USD 3.48 billion.

During the Apr-Nov 2023 period, 14 of the 30 key sectors in merchandise exports exhibited a positive growth compared to 2022. Growth in Iron Ore (203.93%), Oil Meals (34.33%), Electronic Goods (23.56%), Ceramic Products & Glassware (20.9%), topped the list. 16 out of 30 key sectors under merchandise imports also showed signs of negative growth supporting India’s deficit such as Cotton Raw & Waste (-63.97%), Silver (-53.8%), Fertilizers and Crude & Manufactured (-36.34%). While actual figures for services exports are not out yet, services exports are projected to grow at 5.93% during April-November 2023 compared to last year.

Data for the month of November 2023 brings better news as the overall trade deficit for the month eased by more than 30% from an all-time high of USD 31.5 billion in October 2022. Compared to November 2022, the trade deficit marked a decline of 6.7%. Total exports in November 2023 are estimated at USD 62.58 billion, a 1.23% increase over November 2022. Iron Ore, Gems & Jewelry, Drugs & Pharmaceuticals, Fruits & Vegetables, Meat, Dairy & Poultry Products were some of the top contributors to export growth in November 2023. An expected decline in India’s merchandise trade deficit in November is driven by a better-than-expected performance of exports. According to experts, the monthly trade deficit will hover in the range of USD 20 billion to 25 billion through the rest of 2023-24. The month on month improvement in trade deficit in November 2023 might also be due to a positive base effect. October 2023 witnessed a jump in imports due to a spike in gold imports because of the Diwali festival being in November this year.

India’s dependence on import of crude oil to meet its energy needs has made it difficult to reduce imports. However, India’s strength in services, and services exports help ease out the crude oil import bill to some extent. According to sources, India’s exports have taken a hit due to the global slowdown in trade. The sentiment is reflected in the World Trade Organization’s decision to slash global trade growth forecast for calendar year 2023 by 50% from its earlier forecast. A slowdown in global trade will increase pressure on Indian exports, both services and merchandise, and does not bode well for the trade deficit pathway in the coming months.