Merchandise exports contract in July

Merchandise exports contracted in July after rising steadily in the first three months of this fiscal. At $33.9 billion, exports were down 1.5% on-year in July. The contraction in exports was due to weakness in both oil and gems and jewellery exports. Core exports, however, was up 5.7%, albeit lower than the average 8.7% growth seen in the previous two months.

On the other hand, growth in imports picked up 7.5% on-year in July compared with the previous month (5.0%), led by higher oil imports. Out of July’s $57.48 bn imports, oil accounted for $13.87 bn or 24.1% of total imports.

Higher import growth compared to exports saw merchandise trade deficit widen to $23.5 bn from $19 bn in the previous fiscal and $21 bn in the previous month. This is the widest monthly trade deficit in nine months.

According to the Union Commerce Secretary, in addition to elevated prices, high demand for oil products in India led to increase in imports and decrease in exports. It is also noteworthy that the discount on Russian oil price has declined compared to the previous fiscal.

Core imports (non-oil and non-gold), too, came in strong, rising 7.8%, compared to the 7.1% growth logged in the previous month, suggesting strong demand in the economy.

On a cumulative basis, merchandise exports rose 4.15% to $144.12 billion for the April-July period, from $138.39 billion in the year-ago period. Cumulative imports grew faster at 7.6% to $229.7 billion from $213.53 billion. As a result, trade deficit widened to $85.6 billion from $75.14 billion in the previous year.

Services exports were weaker, growing at 3.7% in June¹, compared with 10.2% in May. However, the simultaneous slowdown in services imports resulted in a services trade surplus of $14.4 billion in June, higher than $12.4 billion in June last year and $14.3 billion in May.

¹ The latest data released by the RBI for the services sector is for June 2024