Trade data points to slowing global and domestic demand

Source- The post is based on the article “Express View: Trade data points to slowing global and domestic demand” published in “The Indian Express” on 15th April 2023.

Syllabus: GS 3 – Indian economy

Relevance– Issues related to trade

News– Trade data released by the Ministry of Commerce and Industry on Thursday provides an indication of the headwinds to growth.

What are important takeaways from recently released data?

India’s merchandise exports and imports have now declined in three of the last four months. Tight financial conditions across the world have slowed down global and domestic demand.

As per the latest data, merchandise exports contracted by almost 14% in March and imports fell by around 8%.

How was the performance of the export and import sector in fiscal year 2022-23?

Merchandise exports were $447 billion in 2022-23. It is 6% up from $422 billion in 2022-23.

If we exclude non-oil exports, exports in the full year were actually lower than the year before. Electronic goods have registered a significant expansion. Rice exports, gems and jewelry, cotton, man-made yarn, textiles as well as engineering goods, have shown poor performance.

If oil and gems and jewelry are excluded, imports in March were lower than in the same period the year before.

The latest data also shows that the merchandise trade deficit widened to $267 billion in 2022-23, from $191 billion in 2021-22.

What is the future scenario of trade in India?

The International Monetary Fund has pegged global growth at 2.8% in 2023, down from 3.4% in 2022. So, exports are likely to come under further pressure in the months ahead.

A deep contraction in merchandise exports will slow down the manufacturing sector in India. It will have an impact on overall domestic economic activity.

Both exports and imports are likely to remain weak this year. The extent of domestic demand as compared to external demand will determine the country’s overall current account deficit.