India's exports contract for the first time in two years. All you need to know

India’s merchandise exports contracted for the first time in two years, in October. Slowing external demand amid recession fears in the West have started impacting shipments from the country. This was further exacerbated by a higher number of holidays during the festival month.

How much did exports decline by?

The report said that exports declined 16.65 per cent in October to $29.78 billion, the data released by the commerce department showed on Tuesday. 

Imports, on the other hand, moderated to the lowest level in eight months, growing at 5.7 per cent to $56.69 billion last month. This resulted in a trade deficit of $26.91 billion, which remained above the $25-billion mark for a fifth straight month, according to the data.

When did exports contract the last time?

It was in November 2020 when exports contracted last time, by 8.74 per cent. During October, 24 out of the 30 key export items showed contraction, while only six – electronic goods, rice, tea, oil seeds, oil meals, and tobacco — witnessed growth, the data showed.

Which sectors of the economy saw exports decline most?

Contraction in key commodity groups such as engineering goods (-21.3 per cent), gems and jewellery (-21.6 per cent), chemicals (-16.4 per cent), and readymade garments (-21.2 per cent) dragged down the overall exports.

Non-petroleum, non-gems and jewellery exports -- considered to be core exports --declined by 20.4 per cent to $26.25 billion in October.

What has the government said on declining exports?

Commerce Secretary Sunil Barthwal pointed out that both global as well as domestic factors had had an impact on India’s exports. He also pointed out the “heavy impact” of the festival season.

“Tightening of monetary policy in most of the developed world – Europe, the US and elsewhere – puts less money in the hands of the public. Therefore, consumption slows down. These are going to be tough times for us. There will be a lot of headwinds for us, and this will impact our exports too,” Barthwal told reporters on Tuesday, according to Business Standard.

“I looked at the data of the last two years and I found that during Diwali and pre-Diwali period, there is $4 billion less exports…We also need to look at the seasonality,” he said, adding that export restrictions on items such as steel had also affected export growth.

How do cumulative import-export numbers look for the year so far?

On a cumulative basis, the growth in exports was 12.55 per cent during the first seven months of the financial year (April-October). In terms of value, exports had peaked at $42 billion in the month of March. After June, outbound shipments gradually started declining, with geopolitical tensions affecting demand.