In September 2024, India’s trade deficit significantly improved, reaching its lowest level in five months. This improvement was primarily driven by an increase in merchandise exports and a decrease in gold imports. Furthermore, global demand for Indian merchandise has increased, maintaining export stability. This is a positive indicator not only for the Indian economy but also for investors.
Let’s delve deeper into how export growth and reduced imports are helping lower India’s trade deficit and what it means for investors.
What’s Happening?
According to data released by the Ministry of Commerce on October 16, India’s trade deficit reached a five-month low in September 2024. However, on an annual basis, it increased from $20.08 billion last year to $20.78 billion this year. This growth is due to a slight rise in exports, mainly in textiles, engineering, and electronic products. Despite a decline in petroleum exports, a sharp drop in gold imports helped balance the trade deficit to some extent.
In recent months, the trade deficit was recorded at $29.65 billion in August 2024, $23.5 billion in July, $20.98 billion in June, $23.78 billion in May, and $19.1 billion in April.
Exports and Trade Balance
In September, India’s merchandise exports increased by 0.5%, reaching $34.58 billion, marking a slight recovery after two months of decline. Imports also rose by 1.6% to $55.36 billion, helping reduce the trade deficit. Additionally, gold imports for September were slightly higher than last year’s $4.11 billion but fell by 60% compared to August, dropping from $10 billion to $4.39 billion.
Oil imports declined by 10.44% to $12.53 billion, while the April-September period saw a 5.91% increase, reaching $88.91 billion. Silver imports tripled to $325.66 million, and imports of raw cotton and waste also rose to $134.20 million.
Trade Deficit and Economic Impact
In September, India’s exports rose by 0.6% to $34.6 billion, while imports increased by 1.7% to $55.6 billion. According to the data, from April to September 2023, China surpassed the U.S. to become India’s largest trading partner, with imports from China increasing to $56.3 billion, though exports to China decreased to $6.9 billion.
On the other hand, the U.S. has emerged as India’s top export destination, with shipments rising by 5.6% to $40.4 billion. The U.K. has also become India’s third-largest export destination.
These changes reflect the ongoing economic shifts in global trade. India’s trade deficit with China, which reached $49.4 billion between April and September 2023, remains a concern. However, the increase in exports to the U.S. and the U.K. has helped maintain a balance.
What Does This Mean for Investors?
This period offers a positive outlook for investors. The increase in exports and reduction in the trade deficit is a good sign for the Indian market. Additionally, the decline in gold imports is expected to positively impact the import-export trade, potentially leading to a more stable currency balance.
What’s Next?
According to Mint, Commerce Secretary Sunil Barthwal acknowledged that India’s exports faced challenges due to the global economic slowdown, geopolitical tensions in West Asia and Ukraine, and disruptions in the Red Sea trade route. These difficulties have slowed Indian exports. Additionally, the WTO estimates that trade volumes will grow by 2.6% in 2024 and could reach 3.3% in 2025, although geopolitical risks are expected to persist.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*This article is for informational purposes only. This is not investment advice.
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