India's trade deficit in October widens to $26.91 bn, exports down 17%

Imports during October increased to $56.69 billion against $53.64 billion in October 2021

India's trade deficit widened to $26.91 billion in October. The exports contracted by 16.65 per cent to $29.78 billion in October as compared to $35.4 billion in September, according to data released by the commerce ministry on Tuesday. In October 2021, the exports stood at $35.7 billion. 

Imports during the month under review increased to $56.69 billion against $61.16 billion in September, In October 2021, imports stood at $53.64 billion.  

During April-October, exports recorded a growth of 12.55 per cent to $263.35 billion. Imports rose 33.12 per cent to $436.81 billion, as per the data.

"Both the merchandise exports and imports moderated on a sequential basis between September 2022 and October 2022, which we believe was driven by a larger number of holidays related to the festive season. As a result, the trade deficit widened in MoM terms during this period, but not alarmingly so, in spite of the large YoY contraction in the merchandise exports figure", said Aditi Nayar, Chief Economist, Icra.

"The sequential trend in exports in October 2022 echoes what was recorded in November of 2021, which had seen a later onset of the festive season. As of now, we expect some rebound in exports and imports in November 2022 relative to October 2022, although it may not be as strong as the trend seen between November and December of 2021, given the prevailing global demand concerns", she added.

In September, India's trade deficit was recorded at $26.72 billion. It was lower than $28.68 billion in August. However, it had widened to over $4 billion from $22.47 billion in September 2021.  

In the first half of FY22, between April and September, the deficit was $149.47 billion. This was nearly double the $76.25 billion deficit recorded in the subsequent period in 2021. 

The exports in April-September stood at $229.05 billion. It was 15.54 per cent higher than $198.25 billion in the first six months of FY22.

The imports had risen 37.89 per cent from $274.5 billion in the first half of FY22 to $378.5 billion in the first half of FY23.

Briefing media, Commerce Secretary Sunil Barthwal said that global headwinds are impacting consumption worldwide and that would have an impact on India's exports as well.

The World Trade Organisation (WTO) has projected that the global trade growth will rise by 3.5 per cent in 2022 but only one per cent in 2023.

India's share in global merchandise trade is 1.8 per cent and in global services, it is 4 per cent, and there is a lot of potential to increase this, he said.

"We should not be depressed by the WTO forecast," the secretary said, adding monetary tightening in the US and Europe is impacting demand globally.

He also said that a lot of India's exports have imported inputs like in the pharmaceuticals and there are also some seasonal effects on trade.

According to experts, rising domestic consumption along with economic growth is leading to higher imports, particularly of raw material, capital goods and intermediate products.

When asked about the reason for releasing trade data now only once in a month, Barthwal said there were some fluctuations in the data released on first week of a month and then again by middle of that month, and "it was sending very confusing signals to our stake holders, so we decided to release most updated data" once a month.

Export sectors that recorded negative growth included gems and jewellery (21.56 per cent), engineering (21.26 per cent), petroleum products (11.28 per cent), ready-made garments of all textiles (21.16 per cent), chemicals (16.44 per cent), pharma (9.24 per cent), marine products (10.83 per cent), and leather (5.84 per cent).

Sectors that recorded positive growth included oil seeds, oil meals, electronic goods, tobacco, tea, and rice in October.

Meanwhile, oil imports rose by 29.1 per cent to USD 15.8 billion. Gold imports, however, declined by 27.47 per cent to USD 3.7 billion during the month.

Federation of Indian Export Organisations (FIEO) said that slowdown in merchandise exports is a reflection of toughening global trade conditions amid demand slowdown on account of high inventories, rising inflation, economies entering recession, high volatility in currencies and geopolitical tensions.

(With agency inputs)