India’s merchandise exports surged by 17.3% in October, reaching $39.2 billion—the highest growth in 28 months. This increase was driven by higher demand from developed markets ahead of the Christmas season and strong shipments from key sectors like engineering goods, chemicals, and electronics.
However, despite the robust export growth, imports also hit a record high of $66.34 billion in October, rising by 3.9% compared to the same month last year. This led to a widening of India’s trade deficit, which grew to $27.1 billion from $20.8 billion in September. That said, the trade deficit remains lower than the $30.42 billion recorded in October 2023.
Christmas Demand Boosts Export Performance
Commerce Secretary Sunil Barthwal highlighted that the strong export growth ahead of the Christmas season signals an optimistic outlook for the coming months. “Demand from developed markets looks far better than last year, and we are confident that this trend will continue,” Barthwal said.
Key sectors contributing to the growth include:
- Engineering goods: Benefiting from higher global demand.
- Chemicals and electronics: Both saw significant increases, bolstered by ongoing trends in global trade.
- Readymade garments: A labour-intensive sector, experienced a remarkable growth of over 35%.
Despite ongoing global challenges, such as economic slowdowns in Western markets and disruptions in trade routes, India’s exporters have maintained strong performance, proving resilient amid volatile conditions.
India’s Exports Set to Surpass $800 Billion Target
If the current trends continue, India is poised to achieve record total exports of over $800 billion in this financial year, a milestone that would surpass last year’s performance. Barthwal emphasized that India’s targeted focus on specific sectors and markets has been key to this growth, supported by policy initiatives like the Production-Linked Incentive (PLI) scheme.
Impact of Rising Imports and Trade Deficit
While exports performed strongly, imports also surged in October, largely driven by:
- Crude oil: Imports rose to $18.2 billion, up from $16.1 billion in October 2023.
- Gold: Although gold imports dipped slightly to $7.13 billion, they remained high due to seasonal demand.
This increase in imports contributed to the widening of India’s trade deficit to $27.1 billion, marking a sequential rise from the previous month’s five-month low. Aditi Nayar, chief economist at ICRA, noted that the trade deficit’s rise was primarily driven by increased crude oil imports and festive season-related gold purchases.
Sectoral and Geographic Export Strategy
India’s export strategy is now focused on six key sectors: engineering, electronics, pharma, chemicals, plastics, and agriculture. The country is also targeting 20 key markets that account for 60% of global imports. These sectors represent 67% of global import demand, providing a strategic advantage for India’s export growth.
Barthwal noted that India’s focus on specific sectors and key trade partners is now yielding results, with greater emphasis on market access initiatives, brand promotion, and reducing non-tariff barriers. Efforts to strengthen ties with key regions, including Europe, America, and the Asia-Pacific, are also underway through targeted trade promotion events.
Navigating Global Trade Disruptions
Ashwani Kumar, President of the Federation of Indian Export Organisations (FIEO), highlighted that disruptions in global trade, including tensions in the Middle East and fluctuating prices for crude oil and metals, have affected logistics and led to higher export values. The ongoing tensions between Israel and Iran have created logistical challenges, especially for India’s trade routes through the Red Sea and the Gulf. As a result, businesses have been stockpiling larger inventories in response to uncertainty.
E-commerce Export Hubs to Boost Trade
In an effort to streamline exports, the Indian government has selected logistics aggregator Shiprocket and air cargo handling company Cargo Service Centre (CSC) to establish E-commerce Export Hubs (ECEHs). These hubs will help speed up customs clearance, improve logistics efficiency, and support re-imports of goods without duty payments. The first hub is set to open near Delhi Airport in February 2025, and the government plans to expand these hubs across the country based on feedback from pilot projects.
Conclusion: India’s Export Growth Holds Promise Amid Global Uncertainty
India’s export performance in October reflects a strong rebound, largely driven by the seasonal demand ahead of Christmas and continued growth in key manufacturing sectors. However, the rise in imports, especially crude oil and gold, has contributed to a widening trade deficit. Despite these challenges, India’s export strategy focusing on high-demand sectors and targeted markets, coupled with initiatives like the PLI scheme and e-commerce hubs, positions the country for sustained export growth in the coming months.
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