India’s Trade Deficit Narrows to 20-Month Low in April as Imports and Exports Decline

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India’s trade deficit reached its lowest level in 20 months, amounting to $15.2 billion in April. This decline can be attributed to the decrease in both goods imports and exports, which was driven by lower commodity prices and weakened demand from Europe and the United States. The latest data released by the commerce department reveals that goods exports stood at $34.7 billion, marking a significant drop of 12.6% compared to the previous year. This decline is the most substantial since August 2020 when exports plummeted by 12.7%. It also represents the third consecutive monthly decline in exports. Similarly, imports contracted by 14.1% to $49.9 billion, the sharpest fall since October last year, when imports experienced a decline of 33%. Furthermore, this is the first time since August 2021 that the monthly value of shipments entering the country has fallen below $50 billion. Santosh Sarangi, the Director General for Foreign Trade, highlights the role of commodity prices in driving the decline in both exports and imports, particularly in the petroleum sector.

Additionally, reduced demand for gems, jewelry, and ready-made garments in Europe and the US, as consumers curtailed discretionary spending amid a challenging economic environment, contributed to the decline. However, the outlook for the upcoming months remains unfavorable. Sarangi suggests that the demand scenario does not appear optimistic for the next two to three months. The situation may change from September onwards if the Chinese economy opens up and there is a boost in demand from Europe and the US. This potential scenario could provide a stimulus to global exports. Despite the decline in goods trade, India finds solace in the positive performance of services exports. In April, services exports are estimated to have increased by 26% to $30.4 billion, while imports reached $16.5 billion, representing a 17% increase. Additionally, the commerce ministry has revised the trade numbers for the previous fiscal year.

It is now estimated that the export of goods and services in 2022-23 increased by 14.7% to $775.9 billion, surpassing the earlier estimate by $6 billion. Imports during the same period were approximately $894.2 billion, reflecting a growth of 17.7%, resulting in a trade deficit of $118.3 billion. In summary, India’s trade deficit has narrowed to a 20-month low due to decreased imports and exports in April, driven by lower commodity prices and weakened demand in Europe and the US. However, the outlook for the coming months remains uncertain, with hopes pinned on the opening of the Chinese economy and a potential boost in demand from Europe and the US.

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