India's Merchandise Exports Contracted to 6.56 Percent in September

India’s merchandise exports contracted 6.57 percent YoY in September to reach US$ 26.03 billion on back of a decline of 6.05 percent YoY in August 2019. Export was largely dragged down by key foreign exchange earning commodities such as processed petroleum products, gems & jewellery and engineering goods.

Export of major commodities that experienced contraction:

Out of 30 major export commodities, 22 commodities showed contraction in September, while only seven commodities had contracted in August 2019. Among major export commodities, petroleum product (18.6 percent), gems and jewellery (5.56 percent), engineering goods (6.2 percent), Meat, dairy & poultry products (23.51 percent), RMG of all textiles (2.17) contracted in September 2019.

The core, non-oil and non-gems & jewellery, exports dropped 4.2 percent in September.

On the other hand, only eight out of thirty commodities, Drugs & Pharmaceuticals (8.72 percent), Iron Ore (13.96 percent) and Electronic Goods (33 percent) grew in September.

On global front, a combination of factors such as softening of commodity prices, ongoing trade war between the US and China, uncertainty over Brexit, developments in Iran and Turkey have created uncertainties in the world economy which are reflecting in slower global trade. Moreover, on domestic front, MSMEs and merchant exporters have been facing the problem of access to credit.

Imports contracted sharply:

Merchandise imports dropped at a faster rate of 13.85 percent to US$ 36.89 billion in September compared to US$ 39.58 billion in August 2019, showing weakness in domestic demand. The contraction was largely due to sharp decline in imports of petroleum, gold and transport equipment.

Import of Petroleum, Crude & products, largest in import bill, fell by 18.33 percent to US$ 8.97 billion in September 2019. The decline was driven by volatility in crude oil prices and subdued infrastructure industries.

Import of gold fell by 50.82 percent to US$ 1.27 billion in September. The continued contraction in gold imports is reflection of spike in the price of the precious metals including precious and semi-precious stones.

Among other major importing commodities, import of coal (23.96 percent), petroleum (18.3 percent), chemicals (16.2 percent), plastic material (10.7 percent), precious stones (17.3 percent), iron and steel (14.6 percent) and electronic goods (0.14 percent) contracted in September 2019.

The only significant growth was in import of electrical & non-electrical Machinery that grew 19.43 percent YoY in September 2019.

The core, non-oil and non-gold, imports dropped 8.88 percent YoY to US$ 26.64 billion in September 2019, which raise the concerns of a domestic consumption slowdown.

However, the contraction in imports faster than exports improved the trade deficit to US$10.86 billion in September from US$13.45 billion in August 2019. This will ease pressure on current account deficit, which had worsened to 2 percent of GDP in the Q1 FY19-20.