India’s readymade garment (RMG) and raw textile exports were down by 12.1 percent and 17.5 percent respectively in February this year. Exports of handicraft (minus 28.3 percent) and leather (minus 14.5 percent) declined as well during the month, rating agency CRISIL reported.
Exports are expected to face headwinds from anticipated slowdown in global growth, largely premised on lower growth in advanced economies, such as the United States and the euro area — both key export markets for India. Further, deceleration in domestic growth could lead to some softening in imports.
India’s merchandise exports fell by 8.8 percent year on year (YoY) to $33.9 bn and core (non-oil, non-gold) exports fell by 6.4 percent YoY in February this year. A large part of the decline was because of oil exports plunging 28.6 percent YoY, which was also the first annual decline since February 2021.
As there appears to be a shift from goods towards services demand, which is less import intensive, the goods export slowdown will continue and could intensify as the impact of monetary policy tightening gathers pace, CRISIL observed.
Meanwhile, merchandise imports fell by a slightly lesser 8.2 percent YoY to $51.3 bn in the month. In fact, core imports shrank at a much smaller rate of 2 percent, indicating that domestic economic activity is still showing resilience.
As a result of the sharper decline in overall exports vis-à-vis overall imports, India’s merchandise trade deficit widened marginally to $17.4 bn in February from $16.6 bn in January 2023.
Nevertheless, merchandise trade deficit remains on the decline as softening international commodity prices help reduce India’s import bill, CRISIL added.
