Despite signs of export recovery in September, trade outlook remains uncertain: Crisil Report
Oct 18, 2024
New Delhi [India], October 18 : Despite signs of recovery in September's export growth, challenges such as container shortages and geopolitical uncertainties continue to pose risks, leaving the outlook for merchandise trade uncertain, according to a report by Crisil.
The widening trade deficit poses a concern, especially with the US imposing higher tariffs on Chinese imports, potentially leading to a surge in Chinese exports to Asian markets, including India.
Nonetheless, a robust services trade and strong remittance inflows are expected to provide some stability, helping to keep the current account in a safe zone.
India's merchandise exports witnessed a modest rebound in September, climbing 0.5 per cent year-on-year to USD 34.6 billion after two consecutive months of decline, including a 9.3 per cent contraction in August.
This improvement was driven by a 9.2 per cent increase in core exports, compared to a 2.4 per cent rise in the previous month. Notable growth was recorded in key sectors such as drugs and pharmaceuticals, engineering goods, organic and inorganic chemicals, and readymade garments.
However, the performance was offset by a 26.8 per cent decline in petroleum product exports, a major export category, which continued to drag down overall export figures.
Sequentially, gems and jewellery exports showed some signs of recovery after a period of weakness. The average price of Brent crude oil in September was USD 74.3 per barrel, significantly lower than the USD 94 average in the same month last year.
While the decline in crude oil prices helped reduce India's oil import bill, it also adversely affected the value of petroleum exports, contributing to the sector's ongoing contraction.
On the imports front, merchandise imports rose by a modest 1.6 per cent year-on-year to USD 55.4 billion in September. Oil imports continued to decline, falling by 10.5 per cent due to easing crude prices, following a steep 32.4 per cent drop in August.
Despite steady growth in core imports, the moderation in overall import growth contributed to a narrowing of India's trade deficit to USD 20.8 billion in September, down from USD 29.7 billion in August, and close to the USD 20.1 billion recorded in September 2023.
Non-oil exports exhibited a strong growth rate of 6.8 per cent in September, compared to a marginal 0.1 per cent increase in August. Several sectors demonstrated substantial gains, including drugs and pharmaceuticals, which grew by 7.2 per cent, up from 4.7 per cent in the previous month.
For the April-September period, cumulative merchandise exports rose by 1 per cent to USD 213.22 billion, up from USD 211.08 billion a year earlier.
