India’s trade deficit is facing limited immediate challenges from ongoing geopolitical uncertainties, although it remains a crucial area to monitor, according to a recent Crisil report on India’s trade deficit. Despite these potential disruptions, the forecast for improved trade growth this year by key multilateral organizations brings encouraging news for Indian exports.
In April, India’s exports recorded positive growth despite the disruptions in global trade routes and uneven global economic growth. However, imports grew at a steeper rate, leading to a wider trade deficit.
The report highlights that India’s services exports have been performing well, making the country the fourth-largest exporter of digitally delivered services, following the US, UK, and Ireland. India now accounts for more than a fifth of global trade in services, with digitally delivered services exports reaching USD 257 billion, a 17% year-on-year increase.
In terms of merchandise exports, India saw a 1.1% year-on-year growth to USD 34.99 billion in April, up from USD 34.62 billion in the same month last year, after experiencing a mild contraction of -0.7% in the previous month. Merchandise imports, on the other hand, surged 10.3% year-on-year to USD 54.09 billion, up from USD 49.06 billion in April last year.
Lower shipments of gems and jewellery negatively impacted export growth, while core exports remained positive but slowed to 1.3% year-on-year compared to 9.1% in March. The high growth in merchandise imports was driven by a surge in both oil and gems & jewellery imports, although core import growth remained softer. Notably, in April, prices of crude oil and gold rose sharply on both a yearly and monthly basis.
Oil prices increased to USD 90.1 per barrel in April from USD 85.4 per barrel in March, contributing to the import growth. Gold imports doubled to USD 3.1 billion from USD 1.5 billion in March. Consequently, the merchandise trade deficit widened to USD 19.1 billion from USD 15.6 billion in March and USD 14.4 billion in April last year.
In March, India’s services exports declined 1.4% year-on-year, while imports softened by 2.1%. As a result, the services trade surplus remained stable at USD 13.42 billion, compared to USD 13.48 billion a year ago.