Declining shipments of petroleum products hurting India's overall export figures

New Delhi [India], September 17 : A substantial decline in shipments of petroleum products is one of the key reasons behind the moderating exports globally, including in India which exports refined products to various countries.
Commerce Secretary Sunil Barthwal agreed that export was a "huge challenge".
"Look at global trade data, there has been a decline of imports by many countries, almost by 5 per cent to 6 per cent negative growth. It shows that there is a slowdown in China. There is still recession fears, which is persisting in Europe and the US."
"There are a lot of challenges in trade, but I'm very happy to see in terms of figures, so far, in cumulative terms, we have been able to manage our exports in the positive territory," the secretary told reporters on Tuesday.
India's petroleum exports have plummeted by a staggering 37.56 per cent, dropping from USD 9.54 billion in August 2023 to just USD 5.95 billion in August 2024.
This dramatic decline has significantly impacted India's overall merchandise trade, leading to a 9.33 per cent reduction in August 2024 compared to the previous year.
Over the past month, international crude oil prices have slipped by over USD 10 per barrel to about USD 70 per barrel, due to subdued demand.
Ajay Srivastava, the founder of the Global Trade Research Initiative (GTRI) in an interesting anecdote noted that crude oil prices remained relatively stable between these two periods, suggesting that the drop in petroleum product exports is linked to ongoing disruptions in the Red Sea.
"The yearlong ongoing disruptions have forced shipping routes to take longer paths around the Horn of Africa and Cape of Good Hope, rendering exports to Europe less viable," Srivastava told ANI.
If petroleum exports were to be eliminated from the equation, merchandise exports for August 2024 show a slight increase of 0.05 per cent compared to August 2023.
"Crude oil and petroleum imports fell by 32.38 per cent in August 2024, primarily due to decreased demand from Indian refineries amid lower orders from European markets. We must prepare for challenging times ahead, particularly for high-volume, low-value goods like low end engineering products, textiles, garment and other labour-intensive products, as rising freight costs linked to longer shipping routes are likely to exacerbate the situation," Srivastava added.
On the other hand, import of gold increased substantially in August 2024 over August 2023.
"This was expected as import duties were cut from 15 to 6 per cent in gold and silver in this budget. Looks like much of the gold coming through smuggling route is coming through legal route. We need to watch," he added.
India's overall exports, merchandise and services combined, in August were to the tune of USD 65.4 billion, a dip of 2.4 per cent on a yearly basis. The data recorded same month last year was USD 67.0 billion.
Exports of merchandise goods declined from USD 38.28 billion to USD 34.71 billion and exports of services rose from USD 28.71 to USD 30.69 billion during the month.
During the first five months of 2024-25 (April-July), India's total exports now stand at around USD 328.86 billion, up 5.35 per cent year-on-year. The government has expressed optimism about reaching its full-year target of USD 800 billion.
The overall imports, both merchandise and services combined, increased from USD 77.39 billion to USD 80.06 billion, a rise of about 3.45 per cent, in August. Coming to trade deficit, meaning the difference between the exports and the imports, it widened from 10.39 billion to 14.66 per cent in August.