How were the import and export numbers for the month of August 2022 as per the Ministry of Commerce?

Indian merchandise exports were down 1% yoy in August 2022 at $33 billion according to the preliminary data points released by the Ministry of Commerce at the start of the month. The final trade numbers for merchandise trade will come by the middle of September. In a sense the fall in exports can be attributed to the exports restrictions on items like wheat, steel, iron pellets etc. In addition, the delay in execution of orders amidst the fear of slowdown in developed economies was also a reason. Exports were sequentially down 9%.

For the five months of FY23, i.e. the cumulative April to August period; India exported goods worth $192 billion, which is 17.1% higher on a yoy basis. On a sequential basis, the merchandise trade deficit for August eased to $28.68 billion from $30 billion in July 2022. However, imports are still at elevated levels of $61.68 billion which is a good 45% higher on a yoy basis, although lower sequentially. The Commerce Ministry said that India had proactively stacked up on coal and petroleum products for energy security.

The total exports for FY23 (exports of goods plus exports of services) is expected to touch a new high of $750 billion, compared to $676 billion in FY22. Out of this $750 billion, $450 billion has been set for the merchandise exports target while the balance $300 billion will come from the export of services. However, with the trade deficit crossing $125 billion in the first five months, the risk of the total trade deficit getting closer to the $300 billion mark by the end of FY23 is quite strong, with implications for widening of CAD to 5% of GDP.

On the import story, the merchandise imports were dominated by Crude and coal as India built its energy security reserves. The dip in exports was led by sectors like engineering goods, gems & jewellery and yarns & textiles. The outlook for external demand is tad cautious at this point of time. However, government reps were quick to add that given the current global scenario, India was not in any uncomfortable position. However, the first headwinds may come from the developed nations and Christmas orders.

The issue for exporters is not of order books (which are full), but of delays in execution. Engineering goods witnessed 14.59% contraction while gems and jewellery contracted by 4.08% and cotton yarn contracting by a relatively larger 32.32% on a yoy basis. However, the exports of chemicals were up 8.03%, while exports of electronic goods were up 46.09% and the exports of rice surged by 30.88% on a yoy basis. The factors have been recession fears across the developed world and tepid demand for metals from China.