Uneven recovery? Trade deficit widens in October, exports dip 5.4%

Decline in imports indicates weak demand; recovery may be uneven

India’s merchandise exports fell 5.4 per cent in October, while imports declined at a faster pace of 11.5 per cent than a year ago, data released on Tuesday showed. However, trade deficit was 25 per cent lower than the previous year at $8.78 billion.

Month-on-month, trade deficit widened from $2.72 billion in September, when exports rose six per cent. The fall in imports was moderate compared to previous months, but still substantial.
 

Exports, other than oil and jewellery, rose 6.3 per cent in October. However, this paled in comparison with the 12 per cent rise seen in September. Oil prices were about 33 per cent lower in October than a year ago.
 

Meanwhile, essential non-volatile imports (excluding oil, gold, and jewellery) declined by 8.3 per cent, indicating persistent weak demand.
 

Gold imports rose 36 per cent, and those of pearls and precious stones jumped by 50 per cent. Reflecting rising demand in the segment, electronic goods imports also rose 16 per cent.
 

However, imports of capital goods declined sharply, suggesting that investment demand looks lacklustre as against consumption demand. Transport equipment imports fell 56 per cent, while machinery imports declined by 15.6 per cent in October.

 

Pharma exports grew 22 per cent, rice exports doubled year-on-year, and chemicals exports rose 74 per cent. Gems and jewellery exports, on the other hand, declined 21 per cent, while leather and leather products fell 3.8 per cent.
 

Exporters have received many enquiries and orders, said Sharad Kumar Saraf, president at the Federation of Indian Export Organisations (FIEO). He added that the completion of the US presidential elections and the Christmas and New Year festive season would expedite revival.
 

Rise in imports of precious metals as raw material for the gems and jewellery industry augurs well for the  sector, FIEO said.

Engineering exports, however, fell 3.8 per cent in October. Speaking about this, Mahesh Desai, chairman at Engineering Exports Promotion Council, said India may see headwinds as major European economies such as Germany and France impose fresh lockdowns.
 

Experts said the trend was along expected lines, but cautioned about its sluggish nature.