India’s Exports Contract For Third Consecutive Month Amid Economic Slowdown

India’s merchandise exports dropped by 1.1 per cent in October, contracting for the third consecutive month. This comes after the imports fell by 16.3 per cent, for the fifth month, leading to a trade deficit of $11 billion, according to commerce ministry figures released on Friday, November 15.

Increasing trade wars and a sluggish global economy have prompted the World Trade Organization (WTO) to cut its trade growth forecast for 2019-20 sharply. Global merchandise trade volumes are now expected to rise by just 1.2 per cent in 2019, much slower than the 2.6 per cent growth forecast in April.

The expected increase in 2020 now stands at 2.7 per cent, down from the earlier 3 per cent. WTO has alarmed that downside risks remain high and that the 2020 projection will depend on a return to more normal trade relations.

China’s October exports fell for the third straight month, down to 0.9 per cent, while imports fell for the sixth consecutive month by 6.4 per cent, leaving China with a trade surplus of $42.81 billion, according to the government data.

Out of the 30 major items each in India’s export and import, 18 export items and 22 imported goods experienced contraction. Ready-made garment exports fell by -2.1 per cent and petroleum products by -14.6 per cent.

Gems and jewellery exports, however, grew by 6.02 per cent, chemicals 0.86 per cent, engineering goods 1.2 per cent and pharmaceuticals by 12.6 per cent. Among major importing items, coal, petroleum, chemicals, plastic material, precious stones, iron and steel, and electronic goods shrank by -8.5 per cent.

However, gold imports grew by 4.7 per cent. During the first seven months of the fiscal year (April-October), exports have contracted 2.2 per cent, while imports fell by 8.4 per cent leading to a trade deficit of $95 billion.

Engineering Export Promotion Council (EEPC) chairman Ravi Sehgal said that contracting exports in October did not come as a surprise, considering the global slowdown, more so in destination countries of Indian exports. “However, the pace of degrowth for October has come down month-on-month, while engineering exports have recorded a marginal growth as well. Overall, the picture remains challenging. The government and the RBI should take measures to improve the competitiveness of Indian exports,” he added.

A sluggish and weakening external sector will put pressure on India’s growth, as GDP fell to a six-year low of 5 per cent in Q1 and consumption dipped to an 18-quarter low.

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