Merchandise exports rose 24.2% in April from a year before to $38.2 billion, a record for the first month of any fiscal, despite a relatively strong base. The shipments were driven by a surge in those of petroleum products, electronics and chemicals, according to the preliminary data released by the commerce ministry on Tuesday.
Given the spurt in global commodity prices, especially of energy, in the wake of the Ukraine crisis, imports jumped at a faster pace of 26.6% in April to $58.3 billion. While growing imports suggest a revival of domestic demand, it has inflated trade deficit to $20.1 billion in April from $18.5 billion in the previous month.
Unless international commodity prices recede considerably, trade deficit will likely exceed the crucial $20-billion mark in most of the months in FY23, according to an Icra estimate. It will pressure the current account deficit (CAD), though official sources have allayed concerns about financing the deficit. The CAD is estimated to rise to $20-23 billion in the June quarter, compared with $15.5-17.5 billion in the previous three months, according to Icra.
Moreover, the tangled global supply chains in the aftermath of the Russia-Ukraine war and the consequent surge in international shipping costs pose fresh external headwinds for Indian exporters. The World Trade Organization (WTO), too, has slashed its 2022 global trade growth forecast to 3% from an earlier projection of 4.7%.
Nevertheless, commerce and industry minister Piyush Goyal recently exuded confidence that exports will keep up the good pace in the current fiscal as well, as benefits from the recently-concluded free trade agreement (FTA) with the UAE and another deal with Australia will outweigh potential losses caused by any geopolitical tension.
The rise in exports in April was led by petroleum products (113%), followed by electronics (64%) and chemicals (27%).
However, even core exports (excluding petroleum and gems and jewellery) grew 14.4% on year in April to $27.2 billion, reflecting the impact of decent external demand and elevated commodity prices.
Similarly, core imports jumped at a faster pace of 29.7% in April to $34.4 billion. Among the key commodity segments, purchases of coal jumped 136% to $4.7 billion, petroleum 81% to $19.5 billion and electronics 29% to $6.5 billion.
Icra chief economist Aditi Nayar blamed oil for the sequential rise in trade deficit in April. “Although the non-oil trade deficit remained stable, there was a shift in its composition, with a plunge in gold imports being offset by a rise in non-oil, non-gold imports such as coal and chemicals, an unsavoury yet expected fallout of the higher commodity prices engendered by the Russia-Ukraine conflict,” she said.
Importantly, merchandise exports hit a record $422 billion in FY22, as an industrial resurgence in advanced economies (before the Ukraine war in late February) stirred demand for Indian goods. The country’s exports had remained below par in the past decade, having fluctuated between $250 billion and $330 billion a year since FY11; the highest export of $330 billion was achieved in FY19. So, a sustained surge in exports for a few years will be crucial to India recapturing its lost market share, analysts have said.
EEPC India chairman Mahesh Desai said despite geopolitical challenges, engineering goods exports recorded a 15% rise in April to $9 billion. “This clearly shows India is gradually moving towards becoming a manufacturing powerhouse,” he added.
A Sakthivel, president of apex export body FIEO, said the benefits of the recently signed trade deals with the UAE and Australia and the production-linked incentive schemes will further building on the record exports achieved in FY22.
