While India’s export numbers are encouraging, caution is warranted due to rising global tensions and unevenness in global growth, according to a report by CRISIL Market Intelligence & Analytics (MI&A). What this means is that maintaining export momentum will not be an easy task, opined Crisil’s Dharmakirti Joshi, Chief Economist; Adhish Verma, Senior Economist and Meera Mohan, Economic Analyst.

For instance, many core exports softened in January— electronic goods (9.3 per cent vs 14.4 per cent), engineering goods (4.2 per cent vs 10.2 per cent) and drugs and pharmaceuticals (6.8 per cent vs 9.3 per cent). And some key agricultural exports have been under pressure partly due to the ban on rice exports.

That said, exports of petroleum products rebounded (6.6 per cent vs -17.6 per cent) after four months as crude oil prices saw a sequential uptick ($80.1/barrel in January vs $77.6/barrel in December), the report’s authors said.

Chemical exports

Also, interestingly, chemical exports — one of India’s key export items — seem to be gaining some traction, posting mild positive growth (0.3 per cent) after remaining in contractionary zone for fifteen consecutive months, they added.

On the whole, core (non-oil, non-gold) exports grew 2.5 per cent on-year in January, compared with 5.4 per cent in December. India’s merchandise exports strengthened in January, rising 3.1 per cent on-year to $36.92 billion after 1 per cent growth December.

Despite disruption in trade caused by strife around the Red Sea, exports have fared better than expected, which can be partly attributed to proactive support by the government in the form of easier access to credit, creation of a task force to investigate non-tariff barriers, and tackling sanitary and phytosanitary issues, among others, the authors said. “While merchandise exports has been positive in the past two months, it remains to be seen if this trend can sustain, given the global headwinds.

“The near-term challenge for India’s exports from the disruption caused by the Red Sea strife has been contained so far. How this impacts prices when export contracts are renewed will bear watching. Barring this hiccup, forecasts by major multilaterals of better trade growth this year over last is encouraging,” the authors said.

Cumulatively, India’s merchandise exports have declined 4.8 per cent on-year in April-January this fiscal to $354.04 billion, compared with $372.1 billion a year ago.

Imports down

In April-January this fiscal, merchandise imports cumulatively contracted 6.9 per cent on-year to $559.55 billion, helping narrow the merchandise trade deficit to $205.51 billion from $229.38 billion, per the report.

Crisil MI&A said India’s services exports continued to grow positively, rising 1.3 per cent on-year in December 2023, while imports contracted.

As a result, the services trade balance remains robust at $15.97 billion in December, compared with $15.38 billion in December 2022. India’s performance in services exports has largely remained strong this fiscal and is a big positive for keeping India’s current account deficit in check.