What is affecting trade momentum?

Source: This summary is based on the article “ What is affecting trade momentum?“, published in The Hindu on 6th June 2023.

What is the News?

India’s merchandise exports contracted by 12.7% year-on-year to $34.66 billion in April 2023.

Similarly, imports fell by 14%, amounting to $49.90 billion. This decline is not exclusive to India, as other countries have also experienced drops in imports and exports, reflecting a reduction in global demand.

What are the reasons behind slowing global trade?

Weaker worldwide economic activities, inflation, tightening of monetary policies.

Disrupted supply chains resulting from the Russia-Ukraine conflict. The conflict has affected the prices of energy, food, and commodities, with prices remaining high by historical standards.

The collapse of financial institutions, such as crypto exchange FTX and three banks in the U.S., as well as declining confidence in Credit Suisse, has heightened financial instability.

What are its effects?

Sharp decrease in international trade, due to overall drop in demand for goods and services

Discretionary spending has suffered, affecting certain imports and delaying expenditures.

Inflation has further eroded individuals’ purchasing power and impacted capital flow to developing countries.