Trade Deficit Reaches Five-Month Low In January As Exports Surge; India Inching Closer To $400-Billion Target

In January 2022, India’s overall exports (merchandise and services combined) reached $61.41 billion, exhibiting a positive growth of 36.76 per cent over January 2021 and a positive growth of 38.90 per cent over January 2020.

India’s merchandise exports touched $34.5 billion, 25.3 per cent higher than January 2021; and the services exports touched $26.91 billion, 55 per cent higher than January 2021, and 46.6 per cent higher than the pre-pandemic month of January 2020.

Overall imports in January 2022 are estimated to be $67.76 Billion, exhibiting a slower rate of growth of 30.54 per cent over the same period last year and a positive growth of 30.19 per cent over January 2020

The goods exports in January are 8.75 per cent lower than December’s all-time record figure of $37.81 billion. Still, India’s exports are inching closer to the $400-billion target set for 2021-22 by the government.

The first 10 months of the year have already clocking outbound shipments worth $336 billion, reports The Hindu. This marks a nearly 47 per cent increase from a year ago and a 27.1 per cent increase over the pre-COVID period of 2019-20.

Services imports are estimated to have risen by 60.3 per cent year-on-year to $15.8 billion, 45.3 per cent over pre-COVID levels. However, these estimations will be revised once the Reserve Bank of India updates the actual numbers.

The Gold Factor

Gold imports fell by 40.5 per cent in January 2022 as compared to January 2021 to just $2.4 billion. This is almost half of the $4.72 billion-worth of gold imported in December 2021.

This decline is the biggest factor behind India’s import bill declining to $51.9 billion in January of this year, 12.7 per cent lower than that in December 2021. This resulted in a decrease in the trade deficit that attained a five-month low of $17.4 billion in January. It had hit a record $22.9 billion in November last year, and had averaged 21.7 billion since September.

Still, high imports remain a cause of concern with January’s inbound shipments rising 23.5 per cent year-on-year and staying above the $50-billion mark.

“The surge in gold imports in 2021 was driven by the pent-up demand of 2020 and we expect them to moderate to $30-35 billion in this calendar year. The fall in mobility and the demand for gold with the onset of the third wave and the associated restrictions, helped to pull back the merchandise trade deficit to the lowest level in five months, at $17.4 billion,” Aditi Nayar, chief economist at rating firm ICRA, was quoted as saying.

As compared to January 2021, the exports of coffee and petroleum products close to doubled in January 2022, while the export of cotton yarn and handloom products increased by 42.4 per cent. Sectors like ready-made garments, man-made yarn, leather and engineering goods grew between 20 per cent and 25 per cent.

Since these are labour intensive sectors, exports growth can also be expected to boost employment generation.

A Sakthivel, the president of the Federation of Indian Exporters’ Organisations, expressed confidence that merchandise exports this year could go past the $400 billion target. “Almost all the sectors reporting impressive growth last month were labour-intensive sectors contributing majorly to the exports basket, which itself is a good sign and should bolster job creation,” he said.

He also urged the government to fast track resolution of the challenges in the various export promotion and facilitation schemes launched by the government.