India’s exports had a strong start to the year but faced a sharp decline in the second quarter. In the first two months of the quarter, exports dropped by 5.8%, and in September, growth was barely noticeable, at just 0.5%. By the middle of the year, total exports were up by only 1%. However, in October, exports made an unexpected jump, rising by 17.25% to reach $39.2 billion, the second-highest figure of the year. This increase is mainly due to stronger demand for goods in developed markets ahead of the Christmas season. If this demand continues, exports could remain strong in the coming months.
In addition, India’s services exports grew by 14.6% by September, which further boosted optimism. Officials are hopeful that total exports for 2024-25 could reach a record $800 billion.
The most significant growth in October came from non-petroleum exports, which increased by 25.6%. These exports hit a record $211.3 billion for the first seven months of the year. However, the situation with oil is different. India’s oil imports grew by 13.2% in October to $18.3 billion, while oil exports fell by over 22%, reaching their lowest point in nearly three years. This has caused India’s oil trade deficit to hit a record $13.7 billion. While lower global oil prices may explain the decline in oil exports, the rise in oil imports is harder to explain.
Overall, India’s total imports reached a new high of $66.3 billion in October, surpassing the previous record set in August. This increase is partly due to higher imports of gold, especially with the wedding season approaching. The widening trade deficit, which has been growing for the past few months, is a concern. While India’s foreign exchange reserves are enough to cover about a year’s worth of imports, the rising deficit needs attention.
Looking globally, trade growth is expected to slow down. The World Trade Organization forecasts that global trade will grow by 3% in 2025, up from 2.7% in 2024. Factors like China’s economic slowdown and ongoing global conflicts are contributing to this slowdown. Another concern is the potential for the U.S. to raise tariffs and focus more on boosting domestic production, especially with Donald Trump possibly returning to power. India needs to be careful not to introduce policies that could attract unwanted attention from the U.S., such as the proposed restrictions on laptop imports.
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