Exports bounce back in December 2022, trade deficit flat

For December 2022, India reported total merchandise trade (exports + imports) of $92.72 billion and trade deficit of $26.73 billion, at par with November. Total merchandise trade had been above $100 billion between March 2022 and June 2022, but tapered after that in line with falling commodity prices globally. 

Why are exports and imports lower from the peak of Apr-June period? It was a mix of regulatory measures and global macros. India shifted to Russian oil (which now accounts for 25% of oil imports). This, combined with lower commodity prices, kept headline imports under check and gave relief on trade deficit. On exports, slowdown fears in the US, UK and EU mellowed spending and inventory build-up. 

For the first nine months of FY23 (Apr-Dec), total merchandise trade stood at $884.46 billion; up 18.5% yoy. This can be extrapolated into full year total trade of $1.20 trillion to $1.25 trillion. Overall trade in goods and services stands at $1.26 trillion in the first nine months of FY23; up 19.9% yoy.

The sectors that boosted merchandise exports in December include Iron Ore, Oil Meals, Electronics Goods, Cereals, Tea and Rice. Some of the export laggards were Cotton Yarn, Handicrafts, Mica / coal / ores, Carpets, Petroleum Products, Plastic & Linoleum, Coffee and Oilseeds. 

Sectors that boosted imports included Pulses, Iron & Steel, Newsprint, Transport equipment and Coke / Coal / Briquettes. Items that depressed imports included Gold, Project Goods, Raw Cotton, Sulphur & Iron Pyrites and Silver. At current run rate, overall deficit could end up close to $160 billion and that could imply current account deficit (CAD) at above 4% of GDP for FY23.