India’s trade performance in Q1FY25
In the first quarter of FY25, India’s merchandise exports grew by 6 per cent year-on-year (Y-o-Y). This growth was bolstered by a significantly low base effect, as Q1FY24 had recorded a Y-o-Y decline of 14.1 per cent, coupled with stable demand from key markets such as the United States, the United Arab Emirates, and the Netherlands.
Sequentially, however, exports fell to $110.1 billion from a seven-quarter high of $120.4 billion in the previous quarter.
Merchandise imports in Q1FY25 grew by 7.6 per cent Y-o-Y to $172.2 billion. This increase was driven by a low base effect, with imports of primary and consumer non-durable goods rising by 11.7 per cent and 14.6 per cent Y-o-Y, respectively.
Consumer durable and intermediate goods imports saw more modest growth at 3.5 per cent and 4.3 per cent, while infrastructure goods imports declined by 0.5 per cent.
Top 10 contributors to India’s growth in Q1FY25
The top 10 contributors to the Y-o-Y growth in exports included petroleum products, telecom instruments, aircraft, spacecraft and parts, other commodities, drug formulations and biologicals, electric machinery and equipment, residual chemical and allied products, gold and other precious metal jewellery, computer hardware and peripherals, and basmati rice.
The volume growth of these items varied, ranging from a decline of 25 per cent to an increase of 217.1 per cent, while value growth ranged from 8.8 per cent to 326.2 per cent.
Impact of Bangladesh’s political situation on India
Bangladesh, one of India’s top 10 export destinations, is currently facing political turmoil, which has disrupted economic activities, particularly in its garment industry—a significant sector for the country’s economy.
India’s exports to Bangladesh primarily consist of textile raw materials and petroleum products. The ongoing disruption could negatively affect India’s intermediate exports of these products. However, this situation also presents an opportunity for India to boost its downstream textile exports, especially considering that Bangladesh exported textiles worth $47.38 billion in 2023, the report said.
India’s trade deficit with China widens to $21.8 billion
India’s trade deficit with China remains substantial, increasing to $21.8 billion in Q1FY25 from $20.1 billion in the previous quarter. Historically, the trade deficit with China has fluctuated between $18.4 billion and $24.9 billion since Q4FY22.
India’s imports from China include critical components such as semiconductors, mobile phone parts, and network infrastructure, which are essential for the assembly of electronic products. Notably, India’s electronic exports have recently shown strong performance.
FY25 Global trade performance
Global trade has shown signs of resilience in FY25 despite the uncertain and volatile economic climate, Ind-Ra noted.
During the first quarter of FY25, global trade witnessed a 1.4 per cent Y-o-Y growth, marking the fastest expansion in six quarters. This growth has been underpinned by steady global economic activity, although there are signs of a slowdown in developed economies.
In July 2024, the global manufacturing Purchasing Managers’ Index (PMI) fell to 49.7, signalling a contraction as production levels declined in developed economies. “The slack continued even in August 2024,” the report added.
Despite the challenges faced by the goods sector, demand for services remains strong. The global services PMI stood at 53.3 in July 2024, maintaining its expansionary trend for 19 consecutive months. Additionally, India’s services PMI for August rose to its five-month high at 60.9, outperforming manufacturing sector growth.
India’s trade outlook for Q2FY25
Ind-Ra expects the services trade surplus to grow by 10.6 per cent Y-o-Y to $44 billion in Q2FY25. Overall, India’s CAD is projected to increase to around 1 per cent of GDP in the second quarter of FY25.
Ind-Ra further forecasts a 1 per cent Y-o-Y increase in merchandise exports, touching about $108 billion in the second quarter of FY25, driven largely by a favourable base effect.
Merchandise imports, on the other hand, are expected to rise by 3.5 per cent Y-o-Y to approximately $176 billion during the same period.
Consequently, the goods trade deficit for India is projected to widen to $68 billion in Q2FY25.
First Published: Sep 04 2024 | 1:33 PM IST
