India October exports up 6.2%; imports grow faster on pre-holiday demand

MUMBAI (ICIS)–India’s merchandise exports in October grew by 6.2% year on year to $33.6bn, reversing the contraction in the previous month, while imports increased at a faster rate of 12.3% to $65bn, which was attributed to strong demand ahead of a major holiday.

The resulting trade deficit of $31.5bn for the month was a record high, and 62% higher compared with September’s deficit, according to data from the Ministry of Commerce released on 15 November.

Outbound shipments across sectors, including electronics, engineering goods, textiles and chemicals registered increases in October.

For the month of October alone, exports of petroleum products dropped 4.7% year on year to $6bn, while those of organic and inorganic chemicals edged lower by 1% to $2.14bn.

Exports of pharmaceutical products rose 29.3% to $2.42bn.

On a year-on-year basis, October man-made fabrics and yarn exports increased by 10.2% to $388m, while plastics shipments rose almost 13% to $654.9m.

Meanwhile, imports were led by gold and silver given strong demand ahead of Diwali or the Hindu festival of light, which was celebrated on 12-15 November.

India, which is the largest importer of gold globally, imported $7.2bn worth of the precious metal in October, up 95% year on year, while silver imports more than doubled to $1.3bn.

Imports of crude petroleum and products for the month rose by 8% to $17.7bn, while those of organic and inorganic chemicals increased by 4.5% to nearly $2.5bn, and those of artificial resins and plastic materials increased by 9.5% to $1.9bn, respectively.

October fertilizer imports fell 34.6% to $1.38bn, while imports of chemical material and products increased by nearly 7.4% to $918.7m.

“The higher-than-expected merchandise trade deficit in October reflects multiple factors, including price effects (oil, gold), measures to tame food inflation, steady investment demand, but most important, the Diwali effect – which likely exaggerated the move,” Japan-based Nomura Global Market Research said in a note on 15 November.

“We expect the passage of Diwali to help correct the trade deficit in November, but still high oil/gold prices and stable near-term growth mean the goods trade deficit is likely to remain elevated,” it added.

India’s commerce secretary Sunil Barthwal noted that exports posted growth despite falling global commodity prices, as he expressed hopes that the full-year number would be higher than the previous year.

“The exports sector is on the road to recovery due to the resilience shown by the Indian industry,” Federation of Indian Export Organisations (FIEO) president A Sakthivel said.

The growth in merchandise exports despite weak global demand and the moderation in commodity prices reflect that Indian exporters may be cornering the exports share of some other countries, he added.

However, continued weakness in global commodity prices along with high interest and exchange rates could impact exports and the government is currently examining new markets for exports, Sunil Barthwal said.

For April-October 2023, the first seven months of India’s current fiscal year, exports fell by 7% year on year to $244.9bn, while imports for the period were down by nearly 9% to $392bn.

Focus article by Priya Jestin