India’s Trade Deficit Shrinks to Five-Month Low Amid Export Resilience
India’s trade deficit fell to $20.78 billion in September, the lowest in five months, offering a temporary relief amid global economic headwinds. This marks an improvement from $29.65 billion in August, reflecting both a modest rise in exports and a significant drop in imports. However, sequential declines in exports suggest that growth remains fragile.
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Export and Import Trends
Merchandise exports in September stood at $34.58 billion, marginally up from $34.41 billion a year ago but slightly lower than August’s $34.71 billion. Key sectors like engineering goods (up 10.5% YoY to $9.82 billion), pharmaceuticals, chemicals, and garments drove export growth. However, volatile global demand led to fluctuating monthly export figures, with exports falling from $38.13 billion in May to $33.98 billion in July.
On the import side, September's imports were $55.36 billion, the lowest since May. A significant drop from August’s $64.36 billion indicates weakening domestic demand, particularly for commodities. Despite softer demand, oil imports—India’s largest import component—remain inelastic, making the trade balance vulnerable to global price shifts.
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Services Sector: A Key Contributor
India’s services exports reached $30.61 billion in September, up from $28.42 billion a year earlier, driven by IT and financial services. Services imports also increased to $16.32 billion, reflecting higher demand for outsourced services. Combined merchandise and services exports totaled $65.19 billion, slightly lower than August’s $65.40 billion.
Challenges and Outlook
Global uncertainties, including geopolitical tensions in Ukraine and the Middle East, along with fluctuating oil prices, continue to pose challenges. The WTO expects global trade to grow by 2.6% in 2024, offering a potential tailwind for India’s exports.
With major export destinations including the US, UAE, and China, India’s efforts to diversify trade and maintain resilient export sectors remain essential. “India is well-positioned to navigate headwinds with record forex reserves and robust export promotion measures,” said Manoranjan Sharma, Chief Economist at Infomerics Ratings. In the months ahead, managing geopolitical risks and oil price volatility will be key to maintaining trade momentum and narrowing the deficit further.
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