This financial year has got off to a slow start on the business front. Goods exports fell to $34.6 billion in April, the lowest since last October – the worst month for outbound shipments in 2022-23. This was the third consecutive contraction in exports, and 12.7% lower than last April’s number. Imports plunged by a sharp 14% to a 15-month low of less than $50 billion. A slowing global economy was hurting exports in the second half of 2022-23 with exports falling in four of the six months. But the early April estimates are troubling not only because they represent the sharpest declines in recent months, but also because they indicate an abrupt change in sequential momentum, akin to using the emergency handbrake. This March, exports reached a nine-month high of nearly $42 billion, while imports stood at $60 billion, despite weakness in global demand. The new foreign trade policy talked about achieving an export target of two trillion dollars in seven years. The first month of its implementation could not have gotten off to a more shaky start. Prospects for last year’s healthy 14.7% growth, which had pushed total exports to around $776 billion in 2023-24, are already looking bleak.
There may be some relief as the trade deficit narrows to a 20-month low. But managing the trade deficit cannot be the goal for policy makers. Falling imports also indicate that domestic demand, India’s stated insulation against global headwinds, is waning. In addition, when imports of petroleum (below 14%), and gems and jewelery decline, they also affect exports of value-added final products. Petroleum exports shrank 17.5% in April, while jewelery shipments slumped 30%, marking the seventh contraction in 10 months, even as other job creators such as textiles have been hit hard. Commodity prices have cooled since last year, just one reason for the shrinking trade basket. Officials acknowledged that there is no immediate respite from faltering global demand. China’s opening up of the economy may have prompted an increase in global trade growth forecasts for 2023 (from 1% to 1.7%) from the World Trade Organisation, but recent Chinese data have been underwhelming about the recovery pace. Goods orders for the festive season in reluctant European and North American markets are expected to pick up by September, while services exports may also slow due to recent trade turmoil. India should use this lull period to review its overall trade stance, reliance on a few large markets, and pursue greater integration with global value chains and multilateral trading regimes. These will give better results than new measures to reduce the import bill.