Latest data released by the commerce department estimated that goods imports declined 4.7% to 58.3 billion, while the trade deficit narrowed to $19.8 billion (see graphic).
Higher interest rates, following high inflation, have led to consumers cutting down discretionary spending in western countries and a fall in commodity prices has resulted in lower value of crude and refined products such as petrol and diesel.
During December 2023, key export sectors that have recorded negative growth included petroleum products, ready-made garments of all textiles, chemicals, and leather products. Sectors which are in the positive zone include plastic, electronic goods, engineering items, and gems and jewellery.
“The whole globe is facing an adverse condition. Globally, the picture is quite bad, but India is doing well. We hope to beat the global trends in the January-March quarter also. Yes, we are waiting and watching what is happening in the Red Sea,” commerce secretary Sunil Barthwal told reporters and expressed confidence that the goods and services exports would cross last year’s level of $776 billion.
On the flip side, services exports are estimated to have declined over 10.5% to $27.9 billion, while imports also fell 16% to $13.3 billion. So far, services exports had been holding up.
“Relatively muted quarterly earnings of IT majors had pointed to this being the case, with slowing demand in the western advanced economies,” Rahul Bajoria, MD & head of EM Asia (ex-China) economics, Barclays, said in a note.
Barthwal said that the problems around the Red Sea could increase transportation costs and impact India’s goods exports.
Exporters seem worried over the impact of the tension in the Red Sea where Houthi militants have attacked ships and oil tankers. “Recent tensions in West Asia, especially the threat for consignments routing through the Red Sea, has further added to woes of the exporting community, as the freight rates have gone up unimaginably high, with further burden of various surcharge, pushing Indian exporters to hold back around 25% of the outbound shipments transiting through the Red Sea, which added to the sense of skepticism and nervousness among the businesses and markets across the world,” Fieo president Israr Ahmed said in a statement.