NEWS – The foreign trade data for November 2024 was released by the Ministry of Commerce

HIGHLIGHTS

1. Key Records in External Trade Dynamics

• Services Exports Surpass Goods Exports: For the first time, services exports overtook goods exports, signaling a shift in India’s trade composition.
• Soaring Import Bill: Monthly imports reached a record $69.95 billion, contributing to a record-high merchandise trade deficit of $37.84 billion.
• Gold Import Surge: Gold imports skyrocketed to $14.86 billion, over three times the value recorded in November 2023.

2. Economic Implications of Trade Gap

• Current Account Deficit (CAD):
  • Projected to rise to 2.8% of GDP in Q3 FY2024, the highest in two years.
  • A wider CAD exerts pressure on the rupee, which fell below 85 against the US dollar.
• Imported Inflation:
  • Weakening rupee raises the cost of imports.
  • Major contributors: gold, oils and fats, and chemical products.

3. Sectoral Performance and Challenges

• Merchandise Exports (April–November):
  • Total exports: $284.31 billion, a modest 2.17% year-on-year growth.
  • November exports down by 4.85% YoY.
• Disappointing Sectors:
  • Petroleum Exports: Earnings fell 10.2%, impacted by lower global prices.
  • Gems and Jewellery: Declined by 10.9% in earnings, with volume reductions affecting the labor-intensive sector.

4. Global Trade Environment and US Tariffs

• US Tariff Threats:
  • US President-elect Donald Trump plans high tariffs, potentially impacting Indian exports.
  • Reciprocal tariffs could affect India’s trade relations with the US.
• Impact on Manufacturing:
  • Tariffs may hurt Indian manufacturing, which already experienced growth decline (2.2% in Q2 FY2024).
  • Overall economic growth dipped to 5.4%, a seven-quarter low.

5. Trade Relations with China

• Increasing Imports:
  • Possible surge in imports from China due to cheaper goods, exacerbating the trade deficit.
  • CRISIL highlights the need for vigilant monitoring and effective policy responses to mitigate risks.

6. Recommendations to Boost Competitiveness

• Policy Actions for Export Competitiveness:
  • Expand Production Linked Incentive (PLI) Scheme: Encourage investments in key sectors for cost-effective production.
  • Implement Customs Reforms: Faster and automated clearances for smoother trade operations.
  • Develop Industrial Clusters: Reduce fixed costs and improve the ease of doing business.
• Sector-Specific Interventions:
  • Focus on gems and jewellery to safeguard jobs in this labor-intensive industry.
  • Address global competition by enhancing technological and manufacturing capabilities.

7. Future Outlook

• A combination of external challenges, such as US tariff policies and global economic pressures, along with internal structural inefficiencies, underscores the need for swift policy interventions.
• India must capitalize on its service export strengths while bolstering goods exports through targeted incentives and infrastructure enhancements.