According to provisional data released by the Ministry of Commerce, India’s merchandise trade deficit eased to one-year low of USD 17.7 billion in January 2023. Trade deficit had ballooned to an all-time high of USD 29.3 billion in September 2022. It started shrinking in the following months. This is the first time in nine months that the deficit dropped below USD 20 billion.

Exports and imports both slowed sharply in January 2023 compared to the preceding months. In case of exports, POL exports dropped substantially. The sequential fall in non-POL exports was relatively smaller. In case of imports, POL as well non-POL imports dropped sharply. A sharper fall in imports compared to that in exports led to the sharp contraction in trade deficit.

Provisional trade data are are based on 30 commodities, each, in exports and imports that account for 90-95 per cent of the total trade. A caveat is in place for interpreting this data, particularly, POL trade data.

Detailed data for exports and imports is released 3-4 weeks after the provisional estimates are published. A trend observed in the past few months was the consistent upward revision in data for POL exports and imports in the detailed estimates from the provisional estimates. The revision was in the range of USD 1.5-3.4 billion in case of POL exports. For POL imports, it was in the range of USD 2-2.9 billion. Revisions in non-POL exports and non-POL imports are relatively very small.

India’s exports dropped to 3-month low of USD 32.9 billion in January 2023. This was also the second lowest export value in 14 months.

POL as well as non-POL exports declined in January 2023. POL exports dropped to USD 4.9 billion from average monthly exports of USD 8.1 billion in the preceding nine months. Non-POL exports declined to USD 28 billion from average monthly exports of USD 29 billion, in the similar comparable period.

Exports of leather & leather manufactures, spices and marine products slowed in January 2023 compared to the preceding months. At USD 2.6 billion in January 2023, exports of gems & jewellery remained almost unchanged from the preceding two months. But this was sharply lower compared to the monthly average of USD 3.4 billion during April-October 2022. Exports of readymade garments rose to USD 1.5 billion. This was against the monthly average of USD 1.3 billion during April to October 2022. Exports of electronic goods and engineering goods continued to remain strong.

In January 2023, India’s merchandise imports were valued at USD 50.7 billion. This was a substantial drop from the average monthly imports of USD 61.3 billion in the preceding nine months. Imports peaked in September 2022 at USD 64.7 billion and have slowed thereafter.

POL imports slumped to USD 14.7 billion in January 2023 from average monthly imports of USD 18.2 billion between April to December 2022.

From average monthly imports of USD 3.4 billion during April to November 2022, gold imports fell sharply to USD 1.2 billion in December and further to USD 0.7 billion in January 2023. The government hiked gold import duty to 12.5 per cent from 7.5 per cent in July 2022. This has reportedly led to a rise in illegal gold imports and a fall in gold imports through official channels.

Imports of non-POL, non-gold & silver imports dropped to USD 35.2 billion in January 2023 from the average monthly imports of USD 39.4 billion between April and December 2022.

Imports of pearl, precious & semi-precious stones declined to USD 1.6 billion from the average monthly imports of USD 2.6 billion in the preceding months nine months. A steep drop in gems & jewellery exports from November 2022 is likely to have led to a drop in demand for imports of pearls & precious stones. Fertiliser imports dropped to USD 1.6 billion from the average monthly USD 1.8 billion in the preceding six months. The end of the rabi sowing season is likely to have led to lower imports of fertilisers. Coal, coke & briquette imports dropped to USD 2.6 billion from the monthly average of USD 4.5 billion. International coal prices have been easing after June 2022. This led to a 30 per cent fall in unit value of imports by December 2022 contributing to lower import value. Quantum of coal imports has also slowed in the December 2022 quarter.

Vegetable oil imports have surged once again. Imports had dropped to USD 1.6 billion per month during October-November 2022. In January 2023, imports surged to USD 2 billion. Imports of electronic goods, iron& steel also continued to remain strong.

During April-January 2022-23, India’s merchandise exports increased by 8.3 per cent to USD 368.5 billion. Imports expanded by 21.7 per cent to USD 601.7 billion. Exports as well as imports will continue to slide sequentially. Slowing demand and easing commodity prices are expected to drive this trend. As a result, we expect 2022-23 to end with exports growth slowing sharply to 2.9 per cent compared to 45 per cent growth in 2021-22. Imports growth is also expected to decelerate to 16.9 per cent from 56 per cent in 2021-22.