![]() ![]() The table below captures the monthly data of merchandise exports, imports, and trade deficit over last one year. HOW MERCHANDISE TRADE PANNED IN LAST 1 YEAR This is one of the most important components of current account deficit (CAD), so it also augurs well for a more restrained current account deficit for FY24 at around 1.50% of GDP. However, by containing the gap, the overall deficit for the first 11 months of FY24 stands at just $72.24 Billion. In February 2024, overall trade deficit (merchandise and services combined) came in sharply at $1.95 Billion higher than $0.74 Billion reported in January 2024. Meanwhile other opportunities like outsourced financial services and global capability centres (GCC) are also adding up. However, with the US economy avoiding a hard landing, IT spending is back to relatively robust levels. In recent months, the services surplus dwindled due to weakness in services exports amidst a slowdown in IT services demand. The low hanging fruit for the government is to boost export of services and cutting goods imports. ![]() This overall deficit can be contained either by boosting exports of goods and services or by cutting imports of goods and services. In the first 11 months of FY24, the services surplus has wiped out 67.92% of the merchandise trade deficit. if you combine these two figures, we still have a deficit, but it is substantially lower. India currently runs a deficit in the merchandise trade account (physical goods) and a surplus in the services account. We will look at the overall deficit in greater detail in the next paragraph.įEB-24 OVERALL DEFICIT INCHES UP, BUT FY24 IN CONTROL However, on an overall basis, the services surplus wiped out 67.92% of the trade deficit leaving overall the overall trade deficit (goods and services combined) at just $72.24 Billion for FY24. This lower import intensity, amidst falling commodity and oil prices has been the key factor in keeping the merchandise trade deficit for FY24 in check. Hence, cumulative merchandise trade deficit for first 11 months of FY24 is lower by 8.43% at $225.20 Billion compared to FY23. In the first 11 months of FY23, total exports stood at $409.11 Billion while imports were $655.05 Billion.įor the 11 months of FY24, the total exports were lower at $394.99 Billion while total imports were also lower at $620.19 Billion. Now, a clearer picture emerges if we compare the gross merchandise trade (exports + imports) and the net merchandise trade (exports – imports) for FY24 and compare it with the corresponding 11 months of FY23. Gross merchandise trade is the aggregate of imports and exports, but why is that relevant? It is this gross merchandise trade that shows the volume of trade handled and that has direct implications for the revenues of the government and for jobs created. GROSS AND NET MERCHANDISE TRADE PICTURE FOR FY24 In 7 out of the last 13 months, the trade deficit has now been under $20 Billion, despite touching a lifetime high merchandise trade deficit of $31.46 Billion in February 2024. The trade deficit for February 2024 at $18.71 Billion is higher than January 2024, but this is the third month in a row that the merchandise trade deficit has stayed under the $20 Billion mark. Despite these constraints, India has sharply grown its merchandise exports for February 2024, even as imports have stayed under pressure. Now this longer route means higher freight charges, higher insurance costs and greater time to delivery. To recap, the Houthi rebels were firing at vessels in the Red Sea forcing many of the large global shipping lines to shift to the much longer Horn of Africa route. Just about 2 months back, the EXIM Bank had projected that India’s exports would be hit by $30 Billion or more in fiscal FY24 due to the lag effect of the Red Sea crisis. ![]() FORGET RED SEA CRISIS TRADE IS IN CONTROL
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