Continuing their declining streak, India’s merchandise exports contracted for the sixth consecutive month in July, and at $32.3 billion, were down 15.9% on-year. If not for a favourable base effect (as exports had fallen substantially on-month last July), the annual contraction this July would have been even larger.
Amid the gloomy exports scenario, a couple of things provide some solace.
First, the export figure for June was revised up a good $1.4 billion (to $34.3 billion, from $32.9 billion earlier), which means exports contracted slightly lesser (18.8% from 22.0% earlier).
Second, the 15.9% contraction in July was largely a result of the slowdown in oil exports, which were down 43.8% on-year. Core exports, i.e., non-oil, non-gold1 exports, fell a much lesser 5.7%. In fact, sequentially and on a seasonally adjusted basis, core exports marginally rose in July, due to an improvement in the exports of other key categories such as engineering goods, and organic and inorganic chemicals, and labour-intensive export categories such as gems and jewellery, ceramic products and glassware, and a few textile products (carpets, man-made yarn, and fabrics, among others).
That said, the pressure on goods exports remains, and the sequential improvement in core exports is unlikely to be sustained as global growth is expected to be slower in the second half this year. Plus, the current resilience in demand conditions seen in advanced economies, which are key destinations for India’s exports, stems largely from services. Moreover, the decline appears broad-based, in that goods exports are slowing not only to the West, but also to emerging markets, especially the Asia-Pacific2 (see chart below), India’s largest regional export destination.
