India’s merchandise trade deficit widened to a 10-month high of $24.16 billion in August, as imports surged due on account of festive buying in India.
If seen on month, the trade deficit was up almost 17 percent over July’s $20.67 billion gap between goods imports and exports.
Imports of the country were recorded at an 8-month high, with India importing products worth $58.6 billion in August. However, imports are smaller if compared year on year, down from $61.88 billion in August last year.
"Gold imports have seen a substantial rise probably due to the incoming festive season," Commerce Secretary Sunil Barthwal said speaking to reporters during the release of data.
Gold imports for the month of August were registered at $4.9 billion, up from $3.5 billion in August last year.
Exports rise to a three-month high
While the exports have contracted 6.8 percent if seen year on year, they have risen to a three-month high of $34.48 billion in August.
"There was pessimism until July which is now converting into optimism. Green shoots as export order books looking better. Global trade prospects also improved as per WTO. Unless recessionary trends in the EU get accentuated, green shoots should sustain," Barthwal added.
New Delhi is optimistic for a further rise in exports in the coming months, with its confidence riding on the back of the growth outlook for the financial year 24. "The growth outlook for FY23 was 1.7 percent while for FY24 it is 2.4 percent, which should mean better exports in coming months," Barthwal said.
The fall in exports on year, however, has been due to a decline in petroleum prices. "Nearly half of the decline in exports so far this year was driven by the decline in petroleum prices. Though export volumes of petroleum products are up 6 percent, prices are 27 percent lower than a year ago," commerce officials said.
Additionally, Gems and jewellery exports have been leading the fall due to a slowdown in developed economies. The exports in this sector had fallen by 4.4 billion in the April-August period of the year.
Positive signs from engineering goods
There have been positive signs from shipments of engineering goods which witnessed with a growth of 7.73 percent, while electronic goods grew by 26.29 percent.
After eight consecutive months of year-on-year decline, engineering goods exports have turned positive with total shipments value registering 7.73% growth last month.
As per the data from the Ministry of Commerce and Industry, engineering goods exports stood at US$9.05 billion in August 2023 as against US$8.40 billion in August 2022.
With the sector marking a whopping 25 percent share of India's export basket, the country remains hopeful for an overall uptick as the sectoral exports register a rise.
"We remain optimistic about a resurgence in engineering exports in the coming months as global demand conditions improve and geo-political issues abate. The announcement of the economic corridor connecting India with Europe via the Middle East has already lifted business sentiment," Arun Kumar Garodia, Chairman, of the Engineering Export Promotion Council of India said after the release of data.
Other goods including ceramic goods, drugs and pharma, and agricultural exports are doing well.
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