Merchandise exports fell to a five-month low of $36.27 billion in July, but rose 2.14 percent year-on-year (Y/Y). According to preliminary data released on August 2, exports fell 0.76 percent to $35.24 billion in July, resulting in a larger trade deficit of $31 billion.
Increases in purchases of coal, electrical goods and petroleum products were the main drivers of import growth. Gold prices fell 43.6% to $2.37 billion among major imports after the Center raised import duty on the metal last month. However, due to the revival of the domestic economy and increased price pressure, the import of products other than oil, diamonds and jewelry increased by 42.91 percent.
In terms of exports, some of the main drivers of India’s export growth have slowed. As a result of the weak western demand, mechanical goods decreased by 2.08 percent, precious stones and jewelry by 5.20 percent, pharmaceuticals by 1.05 percent, ready-made clothing by 0.60 percent, and cotton yarn by 28.17 percent. However, some things still showed progress. The chemical industry expanded by 8.03 percent, the electronics industry by 46.0.9 percent, rice by 30.88 percent, and petroleum products by 9.18 percent.
A Sakthivel, head of the Federation of Export Organizations of India, claimed that since global stocks are so high, exports are likely to slow down.
“Goods exports are facing a triple blow – consumption is again shifting from goods to services as economies open up after the Covid-19 pandemic; inflation affecting all economies by reducing purchasing power; and many economies are going into recession, while some advanced ones are already in recession,” Sakthivel said.
In addition, he continued, the normalization of the Covid disruptions has contributed to the build-up of inventories, as goods that used to take 150 days to reach the West Coast of the United States now arrive in just 60 days.
India increased its exports by 20.13 percent between April and July, totaling $157.44 billion.
Mahesh Desai, chairman of India’s Engineering Export Promotion Council (EEPC), claimed that the decline in engineering exports in July was due to sluggish demand in India’s main markets.
“Recession fears in the West added to uncertainty. While geopolitical risks remain high and pose downside risks to growth, the recent easing in commodity prices is a relief,” said Desai.
Commerce Minister BVR Subhramanyam said India should be “worried” earlier this month, despite trade deals with the UAE and Australia allowing India to offset losses in those two regions. The US and Europe are India’s two largest export markets.