As merchandise exports and imports fall, trade deficit narrows

India’s merchandise exports fell for the fourth month on the trot, by 10.9% on-year to $36.9 billion in February from $41.4 billion a year ago, after a 2.4% decline in January. This is the sharpest contraction in trade in 20 months that stems from a broad-based decline in the exports of crude oil, core1, and gems and jewellery, amid rising uncertainties from tariff actions.

Crude oil exports slumped to a nine-month low as prices fell. Brent crude slipped to $75.2 per barrel compared with $83.8 per barrel a year ago and $79.2 per barrel in January.

However, in volume terms, exports of petroleum products increased between April and January, which suggests the February fall in their exports was driven by price. Additionally, core exports contracted 4.7% on-year - the first time in 15months - partly owing to a high-base effect.

Merchandise imports, too, fell - 16.3% on-year to $50.96 billion in February from $60.9 in the year-ago period - following 10.4% growth, on average, in the previous three months. The biggest drag came from oil imports, which skid 29.6% after a 13.5% decline in January. Gems and jewellery imports dived 59.8% on-year owing to a 62% drop in gold imports. Prices of the yellow metal surged 43.1% on-year to $2,895/toz from $2,023/toz in February 2024. Growth fell sequentially as well, by 13%. On the other hand, core imports grew 3.1% on-year.

All that meant was merchandise trade deficit narrowed to $14.1 billion in February from $23 billion in January and $19.5 billion a year ago.

Cumulatively, merchandise export growth was flat - $395.6 billion during April-February compared with $395.4 billion in the year-ago period. Cumulative imports, on the other hand, increased 5.7% to $656.7 billion from $621.2 billion. As a result, the trade deficit during the period widened to $261.1 billion from $225.8 billion.