<p>The foreign trade data for November 2024, released by the Ministry of Commerce recently, shows multiple records. For the first time services exports overtook goods exports, indicating a major shift in the country’s external trade dynamics. India’s monthly import bill soared to nearly Rs 5,94,524 crore ($70 billion) for the first time, and the merchandise trade deficit, the difference between the country’s goods imports and exports, hit a record high of Rs 3,21,382 crore ($37.84 billion).</p><p>Another record was related to the shipment of gold. The value of gold imports jumped to a record high of Rs 1,26,208 crore ($14.86 billion) in November, which is over three times compared to Rs 28,876 crore ($3.4 billion) recorded in the same month last year. Doubts are being raised over the gold import figures though. News agency <em>Bloomberg</em> reported that there might be calculation errors. However, no official clarification has been issued so far. </p><p>These records do not bode well for the Indian economy. The country imported goods worth Rs 5,94,099 crore ($69.95 billion) while the value of exports stood at just Rs 2,72,716 crore ($32.11 billion) during November. This surge in the trade gap will widen the country’s current account deficit. According to ICRA, India’s current account deficit is likely to increase to 2.8 per cent of GDP in the quarter ending December, the highest in two years. It will put further pressure on the Indian currency, which has weakened by around 2 per cent this year.</p>.<p>The rupee recently slipped below 85 against the US dollar. At the end of 2023, the rupee had closed at 83.35 against the greenback. The weakening of the rupee will make imports more expensive and lead to an uptick in imported inflation. Gold, oils and fats, and chemical products are the major contributors to imported inflation.</p><p>In the first eight months of the current financial year, the value of merchandise exports stood at Rs 24,14,701 crore ($284.31 billion), which is just 2.17 per cent higher when compared with the corresponding period of the last year. The outbound shipment during November was 4.85 per cent lower, year-on-year. The two most disappointing sectors are petroleum and gems and jewellery. In the first half of the current fiscal, earnings from petroleum exports dropped by 10.2 per cent and gems and jewellery by 10.9 per cent when compared with the same period last year. While the poor numbers in the petroleum sector are due to lower prices in international markets, there was a sharp decline in gems and jewellery exports in volume terms. This is worrisome given the labour-intensive nature of the gems and jewellery industry.</p><p>The US President-elect Donald Trump’s plan to impose high tariffs may significantly impact India’s foreign trade. Trump has threatened to impose high tariffs on imports to the US. While China is in focus, Trump has also threatened to impose reciprocal tariffs on imports from India, alleging that New Delhi imposes high taxes on American products.</p><p>Devendra Kumar Pant, Chief Economist at India Ratings and Research, said that the imposition of high tariffs by the US would impact Indian exports and hit the economy, especially the manufacturing sector. Manufacturing output growth slipped to 2.2 per cent in the July-September quarter dragging the overall economic growth to a seven-quarter low of 5.4 per cent.</p>.‘Exporters need a predictable business environment’.<p>“With prospective US tariff hikes against China, India’s imports from China could rise as Beijing tries to push away its deflationary pressures by exporting cheap goods to other economies. This is something India, along with other Asian nations, is already facing in many goods categories. Hence, India’s goods trade deficit will need to be monitored over the next few months and will require deft policy responses from the authorities,” rating agency CRISIL said in a note.</p><p>Mithileshwar Thakur, secretary general of the Apparel Export Promotion Council (AEPC), said several policy actions are needed to improve the competitiveness of Indian exports.</p><p>“PLI (production linked incentive) scheme should be expanded to more and more key sectors to attract investments and build production and export capabilities of those sectors. That will help Indian industry achieve economies of scale and thereby cost competitiveness,” Thakur said.</p><p>He also suggested the implementation of speedy reforms in customs to promote faster and automated clearance and the development of industrial clusters to minimise fixed costs and promote ease of doing business for the industry. </p>
<p>The foreign trade data for November 2024, released by the Ministry of Commerce recently, shows multiple records. For the first time services exports overtook goods exports, indicating a major shift in the country’s external trade dynamics. India’s monthly import bill soared to nearly Rs 5,94,524 crore ($70 billion) for the first time, and the merchandise trade deficit, the difference between the country’s goods imports and exports, hit a record high of Rs 3,21,382 crore ($37.84 billion).</p><p>Another record was related to the shipment of gold. The value of gold imports jumped to a record high of Rs 1,26,208 crore ($14.86 billion) in November, which is over three times compared to Rs 28,876 crore ($3.4 billion) recorded in the same month last year. Doubts are being raised over the gold import figures though. News agency <em>Bloomberg</em> reported that there might be calculation errors. However, no official clarification has been issued so far. </p><p>These records do not bode well for the Indian economy. The country imported goods worth Rs 5,94,099 crore ($69.95 billion) while the value of exports stood at just Rs 2,72,716 crore ($32.11 billion) during November. This surge in the trade gap will widen the country’s current account deficit. According to ICRA, India’s current account deficit is likely to increase to 2.8 per cent of GDP in the quarter ending December, the highest in two years. It will put further pressure on the Indian currency, which has weakened by around 2 per cent this year.</p>.<p>The rupee recently slipped below 85 against the US dollar. At the end of 2023, the rupee had closed at 83.35 against the greenback. The weakening of the rupee will make imports more expensive and lead to an uptick in imported inflation. Gold, oils and fats, and chemical products are the major contributors to imported inflation.</p><p>In the first eight months of the current financial year, the value of merchandise exports stood at Rs 24,14,701 crore ($284.31 billion), which is just 2.17 per cent higher when compared with the corresponding period of the last year. The outbound shipment during November was 4.85 per cent lower, year-on-year. The two most disappointing sectors are petroleum and gems and jewellery. In the first half of the current fiscal, earnings from petroleum exports dropped by 10.2 per cent and gems and jewellery by 10.9 per cent when compared with the same period last year. While the poor numbers in the petroleum sector are due to lower prices in international markets, there was a sharp decline in gems and jewellery exports in volume terms. This is worrisome given the labour-intensive nature of the gems and jewellery industry.</p><p>The US President-elect Donald Trump’s plan to impose high tariffs may significantly impact India’s foreign trade. Trump has threatened to impose high tariffs on imports to the US. While China is in focus, Trump has also threatened to impose reciprocal tariffs on imports from India, alleging that New Delhi imposes high taxes on American products.</p><p>Devendra Kumar Pant, Chief Economist at India Ratings and Research, said that the imposition of high tariffs by the US would impact Indian exports and hit the economy, especially the manufacturing sector. Manufacturing output growth slipped to 2.2 per cent in the July-September quarter dragging the overall economic growth to a seven-quarter low of 5.4 per cent.</p>.‘Exporters need a predictable business environment’.<p>“With prospective US tariff hikes against China, India’s imports from China could rise as Beijing tries to push away its deflationary pressures by exporting cheap goods to other economies. This is something India, along with other Asian nations, is already facing in many goods categories. Hence, India’s goods trade deficit will need to be monitored over the next few months and will require deft policy responses from the authorities,” rating agency CRISIL said in a note.</p><p>Mithileshwar Thakur, secretary general of the Apparel Export Promotion Council (AEPC), said several policy actions are needed to improve the competitiveness of Indian exports.</p><p>“PLI (production linked incentive) scheme should be expanded to more and more key sectors to attract investments and build production and export capabilities of those sectors. That will help Indian industry achieve economies of scale and thereby cost competitiveness,” Thakur said.</p><p>He also suggested the implementation of speedy reforms in customs to promote faster and automated clearance and the development of industrial clusters to minimise fixed costs and promote ease of doing business for the industry. </p>
