India’s merchandise exports surged 17.3% year-on-year in October, reaching $39.2 billion—the fastest growth in 28 months. This impressive spike is largely attributed to a build-up of inventory in Western countries ahead of the Christmas season, boosting demand for Indian goods.
However, the positive export performance comes amid a sharp rise in imports, which hit an all-time high of $66.34 billion in October. This 3.9% increase in imports led to a widening of the trade deficit to $27.1 billion, up from $20.8 billion in September, as reported by the Commerce Department.
Strong Performance in Non-Petroleum, Non-Gems Exports
A key highlight is the performance of non-petroleum and non-gems exports, a crucial indicator of India’s manufacturing health. These exports jumped 27.7% to $31.36 billion in October. This growth was driven by strong demand for several sectors, including:
- Engineering Goods: +39.4%
- Chemicals: +27.35%
- Electronics: +45.7%
- Readymade Garments: +35.1%
- Rice: +85.8%
While these sectors performed well, exports of petroleum products—a significant part of India’s export basket—declined by 22.1% to $4.6 billion due to a sustained drop in global crude oil prices.
Import Surge and Rising Trade Deficit
On the import side, key drivers of the increase included crude oil (up 13.3%), electronic goods (up 6.8%), vegetable oil (up 50.9%), and machinery (up 8.7%). Notably, gold imports remained high at $7.14 billion, despite a slight 1% year-on-year contraction.
As a result, the overall trade deficit for October widened to $27.1 billion. For the April-October period, the cumulative trade deficit stood at $164.65 billion, as imports grew 5.7%, outpacing the 3.2% growth in exports.
Optimistic Outlook for India’s Exports
Despite the trade deficit, there is optimism regarding India’s export outlook. Commerce Secretary Sunil Barthwal is confident that export performance in FY24 will surpass last year’s figures, with a target of reaching $800 billion in total goods and services exports. He attributes this growth to India’s manufacturing competitiveness, fueled by schemes like the Production Linked Incentive (PLI).
Barthwal also noted that October’s export growth benefited from the seasonal inventory build-up for Christmas sales, signaling a strong holiday season in Western markets.
Volatility in Global Markets Affects Trade Flows
Trade officials and industry leaders also pointed out the impact of geopolitical and economic uncertainties on India’s export performance. Ashwani Kumar, president of the Federation of Indian Export Organisations (FIEO), highlighted the logistical challenges posed by tensions in the Middle East, particularly between Israel and Iran. These tensions have disrupted trade routes and increased reliance on large inventories in key markets like Europe, Africa, and the Gulf.
Services Exports Continue to Thrive
While merchandise exports saw a rise, India’s services exports also demonstrated strong performance in October. Services exports grew by 21.3% to $34 billion, supported by sectors like IT and business services. However, services imports also rose by 26.3% to $17 billion, resulting in a surplus of $17 billion in the services trade balance.
Trade Balance Trends and Future Projections
Looking ahead, economists expect India’s current account deficit to narrow to 1.2% of GDP in Q3 FY25, down from an estimated 1.8% in Q2 FY25. For the full fiscal year, the current account deficit is projected to settle around 1% of GDP.
Conclusion: Mixed Signals for India’s Trade
India’s export performance in October is encouraging, showcasing growth in key sectors and higher demand from global markets, particularly ahead of the holiday season. However, the rising trade deficit and the impact of volatile global markets suggest that India’s trade balance remains sensitive to external factors.
