India's Exports Slump in March amid Global Slowdown

India's exports saw their sharpest decline in almost three years in March, falling at a rate of 13.9% YoY to $38.38 billion in March, India's exports fell at the fastest rate in nearly three years, falling 13.9% year on year (YoY) to $38.38 billion from $44.57 billion YoY in March 2022. Experts are suggesting that geo-political disruptions and a slowdown in the developed economies weighed on external demand.

Key Sectors Experience Contraction

According to the data released by the Ministry of Commerce and Industry on Friday, 17 out of 30 key sectors experienced a contraction in March. Key export goods that dipped last month include gems and jewellery (-18.6 per cent), engineering goods (-16.8 per cent), petroleum products (-15.5 per cent), leather and leather products (-14.5 per cent) and chemicals (-13.4 per cent).

India’s Trade Deficit and Total Exports

India's trade deficit also widened to a three-month high at $19.73 billion in March this year. The trade deficit grew from $191 billion in FY22 to $267 billion in FY23, a rise of over 40%. ⁠⁠⁠⁠⁠⁠However, using estimates for services exports during March for which final data will only be available in May, the Commerce and Industry Ministry pegged the total trade deficit for the year at $122 billion, 46 per cent higher than the $83.5 billion gap in 2021-22.

"Despite the global headwinds, we have surpassed our 2022-23 target of $750 billion, which is $94 billion higher than last year's record exports," Commerce Secretary Sunil Barthwal said, using services estimated exports paired with actual export data for goods.

He added that India's share in global merchandise exports increased from 1.67 per cent in 2019 to 2.03 per cent in 2022, while its share in global services exports increased from 3.54 per cent to 4.07 per cent in the same period.

Slow International Trade

The United Nations Conference on Trade and Development (UNCTAD) in its latest trade and development report update said world trade was facing several headwinds and that weaker economic activities worldwide would invariably result in less external demand and, as a result, deflated international commerce. ⁠⁠⁠⁠⁠⁠⁠As a result, the annual growth of international trade is expected to remain close to the growth of the economy in 2023 which is 2.2 per cent.

Decline in Imports in March

On the flip side, India saw a decline of 7.89 per cent in imports in the last month bringing the total imports to $58.11 billion. Even though, during the entire FY2022-23 imports grew at 16.5 per cent to $714 billion.

Lower imports of items such as fertilizers, coal, petroleum products and especially, electronic goods are being attributed to the decline in imports in March 2023.

The ministry said that the lower imports of electronic goods were due to the government's efforts to promote domestic manufacturing under various schemes such as production-linked incentive (PLI), phased manufacturing programme (PMP) and modified special incentive package scheme (MSIPS).

The ministry also said that India's trade with its free trade agreement (FTA) partners increased by 18.7 per cent in FY23 compared to FY22, indicating that India was able to leverage its FTAs for enhancing its exports.