Exports shrink in September, trade deficit widens

India's outbound shipments shrank after 19 months in September with job-creating sectors such as engineering, garments and cotton yarn being the worst hit. Merchandise exports shrank 3.5% on-year in September on faltering global demand, rising inflation, geopolitical tensions and restrictions on export of select goods.

The previous contraction in exports was in February 2021.

Data released by the commerce ministry on Monday showed the trade deficit widening to $26.72 billion last month from $22.47 billion in the year ago period.


However, the trade gap reduced sequentially.

The government said that the trade deficit in September was "an improvement over the trade deficit of $28.68 billion in August 2022."

"Export in certain sectors has seen a decline on account of slowdown in some developed economies and consequential slowdown in demand," it said, adding that certain measures to contain domestic inflation and domestic food security concerns have also impacted exports.

India has imposed restrictions on export of sugar, rice and wheat.

Goods exports dipped to $32.6 billion in September from $33.8 billion a year ago, while growth in imports slowed to 5.4% at $59.3 billion from 37.3% in August.

"Lower international commodity prices and some revival in exports helped consolidate the trade deficit in September, albeit modestly," Barclays said in a note, adding that the trade deficit in the July-September quarter was a record $84.7 billion.

The fall in international commodity prices, especially crude oil, is expected to help shrink the deficit in coming months

During September, the export of engineering goods, organic and inorganic chemicals, pharmaceuticals, readymade garments, cotton yarn and rice contracted.

"The slowdown in exports is a reflection of the toughening conditions of the global trade facing demand slowdown on account of high inventories, rising inflation, economies entering recession, high volatility in currencies and geopolitical tensions," said A Sakthivel, president, Federation of Indian Export Organisations, adding that the coming few months would be quite challenging unless the geopolitical situation improves drastically.

Merchandise exports grew 15.5% in April-August, while imports rose 37.9%.

Imports of petroleum products, electronic goods, gold, precious stones, chemicals, vegetable oil declined in September, while import of machinery, transport equipment, coal, and iron and steel increased.