India's goods exports may surpass USD 400 billion mark for 3rd year in a row

Amidst global uncertainty, India's merchandise exports have displayed resilience, experiencing positive growth in December. According to data released by the Ministry of Commerce, India's merchandise exports for December 2023 amounted to USD 38.45 billion, marking a 1% year-on-year (Y-o-Y) increase from USD 38 billion in December 2022. The growth in India's merchandise exports was primarily led by non-oil exports, which grew by 6% Y-o-Y. In contrast, oil exports declined 18% during the same period on the back of fall in global oil prices.

Exports

In December 2023, India saw Y-o-Y positive growth in exports for 17 out of the 30 principal commodities. These 17 items, collectively valued at USD 22.9 billion, account for 60% of India’s total goods exports. Notably, engineering goods, which fell 0.44% in the current financial year showed recovery with a growth of 10.19% last month.

Engineering goods play a crucial role as India's primary export product, contributing to a 23% share in the overall goods export basket. Another sector that showed improvement was Gems & Jewellery, which, despite a year-on-year decline of 16% in the current financial year, witnessed a notable growth in exports,

rising by 14% in December. However, labor-intensive sectors such as textiles and handicraft exports continue to face challenges, with no significant recovery observed.

Imports

After hovering above the USD 20 billion mark for two consecutive months, India’s merchandise trade deficit has once again fallen below this mark to USD 19.80 billion due to a 5% Y-o-Y decline in the value of merchandise imports, which now totals USD 58.25 billion. The easing of oil prices comes as a significant relief to India, considering it is among the world's top importers of oil. India's oil import bill for December 2023 was 23% less than last year while the import value of non-oil goods increased by 3% indicating strong domestic economic activity.

Imports of gold have experienced a substantial surge, registering a remarkable 156% year-on-year growth. The import value for gold in December 2023 reached USD 3 billion, compared to last year's USD 1.2 billion. Additionally, imports of food products, such as pulses, fruits, and vegetables, have seen a 25% increase. These imports might contribute to the easing of food inflation, which exceeded 9% in December 2023. There has also been a notable surge of 48.5% in the import of electronic goods, reaching USD 9.4 billion from the previous year's USD 6.3 billion.

Conclusion:

The past two years witnessed remarkable growth in India's international trade, achieving record export figures that surpassed the USD 400 billion mark for two consecutive financial years. However, given the current global economic and geostrategic conditions, it is unlikely that India's export figures for the financial year 2023-24 will replicate the performance of the last two years. Nevertheless, with a total export value of USD 317 billion in the first nine months of the financial year 2023-24, India may still reach the USD 400 billion mark for the third consecutive year. We estimate India's exports to be around USD 423 billion, with imports totaling approximately USD 673 billion. Considering the resilient service exports and inward remittances, India’s current account deficit is expected to be at a very comfortable position of below 1% of the GDP.