India's exports up 24% to $38 bn in April; trade deficit widens to $20 bn

India’s merchandise exports in April grew 24.2 per cent year-on-year to their third-highest level ever of $38.2 billion on the back of higher commodity prices amid the ongoing Russia-Ukraine war, the preliminary trade data released by the commerce ministry showed on Tuesday. The preceding month had witnessed record outbound shipments of $42.2 billion.

Imports in April surged 26.6 per cent to $58.3 billion, leading to a trade deficit of $20.1 billion during the month. Petroleum products (113.2 per cent), electronic goods (64 per cent), and chemicals (26.7 per cent) led the growth in exports in April, while engineering goods (15.4 per cent), pharmaceuticals (3.9 per cent), and readymade garments (16.4 per cent) registered sub-par growth. On the other hand, the export of gems and jewellery (-2.1 per cent) and rice (-14.2 per cent) contracted during the month.

The robust growth in imports in April came despite a 73 per cent drop in gold imports to $1.7 billion. 

Import growth was led by coal (136.4 per cent), crude oil (81.2 per cent), chemicals (46.9 per cent), vegetable oil (33.6 per cent), and electronic goods (28.6 per cent).

Aditi Nayar, chief economist at ICRA, said unless commodity prices receded appreciably, she expected the merchandise trade deficit to print above $20 billion for most of FY23. “The increase in the merchandise trade deficit was entirely on account of oil. Although the non-oil trade deficit remained stable, there was a shift in its composition, with a plunge in gold imports being offset by a rise in non-oil non-gold imports such as coal and chemicals -- an unsavoury yet expected fallout of the higher commodity prices engendered by the Russia-Ukraine conflict,” she said.

Engineering Export Promotion Council Chairman Mahesh Desai said while engineering goods exports continued the growth momentum set in FY22 despite geopolitical challenges, high logistics cost and unprecedented increases in raw material costs had been hurting the engineering and other sectors. “While the trade deals with the UAE and Australia are expected to give a boost to the sector, the proposed free trade pacts with other countries like the UK and Canada would further give impetus to exports from India,” he said.

Prospects for the global economy have darkened since the outbreak of the war in Ukraine on February 24. The World Trade Organisation (WTO) last month lowered its 2022 global trade forecast to 3 per cent from 4.7 per cent due to the ongoing conflict and a potentially more transmissible Omicron subtype fettering China. Despite comfortably crossing the $400 billion export target in FY22 by $20 billion, the commerce ministry has not projected any fresh target for FY23 given the uncertainty surrounding world trade.