iifl-logo-icon 1

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

  • Open Demat with exclusive Advice & Services
  • Get a dedicated Relationship Manager to help you grow your wealth
  • Exclusive advisory on 20+ trading & wealth-based investment options
  • One tap Investments, Automated trading & much more
  • Minimum 1 lakh margin required
sidebar image

Apr-24 trade deficit widens to $19.10 Billion as exports fall sharply

23 May 2024 , 09:59 PM


The Red Sea crisis has gone through various iterations in the last 6 months since it first started. Just as the Indian economy had managed to extricate itself from the impact of a possible global hard landing, the Red Sea crisis came as a nasty blow. Here is what has happened in the Red Sea crisis in the last 6 months since it first started.

  • It began with massive attacks engineered by the Hamas on Israel, resulting in Israel virtually declaring war on the Hamas. Over the last few months, Israel has not only dug deep into Palestine, but has also kept up the barrage of attacks on Hamas targets.
  • To protest against the human rights violations by Israel in Palestine, the Houthi rebels of Yemen offered unofficial support to the cause. They started by firing rockets at Israeli ships that passed through the Red Sea, but gradually more ships were targeted.
  • The Red Sea route connects Asia with the Suez Canal and is the gateway for Asian goods to reach Europe and the US in the most economical manner. Amidst the Red Sea route, Asia could not use the Suez Canal route and had to use the much longer African route.
  • Most of the major shipping liners in the world, decide to switch from the Red Sea route to the Horn of Africa route. That going around the Cape of Good Hope in South Africa and then turning around the Indian Ocean to reach other Asian markets.
  • While this circuitous route made the journey to Asia longer by 10-15 days, it had two other implications. The first implication was that price of crude oil shot up from $70/bbl to $90/bbl since most of the oil and gas typically travels through this route.
  • The other impact of the longer route was that the freight and insurance costs went up. A combination of delayed deliveries and higher freight and insurance costs has had an inflationary impact on India and has hit the export volumes in April 2024.

In recent months, the situation has gotten a lot more complicated with Iran also joining in the fray after Israel allegedly attacked Iranian facilities in Syria. The involvement of Iran has larger implications as they control the gateway to the Straits of Hormuz, which moves most of the oil and gas through Asia. The export impact could continue for longer.


The merchandise trade deficit in April 2024 at $19.10 Billion is the highest level since December 2023. That has clearly been an outcome of trade constraints created by the Red Sea crisis and the consequent impact on freight costs and insurance costs. However, the overall trade deficit is not just about merchandise trade, but also about services trade. In India the Ministry of Commerce reports the merchandise trade data on a monthly basis. However, the services trade data is reported by the RBI with a lag of one month. To permit a comparison of trade and services data, the Directorate General of Foreign Trade (DGFT) extrapolates the lag data to the current month, to make it comparable with goods data. Since the merchandise trade story has been well documented, let us look at services.

India has traditionally run a deficit on the merchandise trade account but a surplus on the services trade account. For the month of April 2024, the services exports were 14.7%  higher at $29.57 Billion, while the services imports were 21.56% higher yoy at $16.97 Billion. This translates into a services trade surplus of $12.60 Billion, which is 6.6% higher on a yoy basis. When the services trade surplus is combined with the merchandise trade deficit, the overall trade deficit for April comes down to just $6.50 Billion. This figure is the key input that goes into the current account deficit (CAD) calculation. What do these services comprise of? In the Indian context, the services exports are predominantly IT services. However, other services like accounting services, legal services, auditing services, medical services, and global competency centres (GCCs). They have given the edge to India in bringing its CAD progressively under control.


The table below captures the monthly data of merchandise exports, imports, and trade deficit over last one year. April 2024 marks the fifth successive month when the merchandise trade deficit has been under the $20 Billion mark.

($ Billion)
($ Billion)
Trade Surplus
/ Deficit
Apr-23 34.66 49.90 84.56 -15.24
May-23 34.98 57.10 92.08 -22.12
Jun-23 32.97 53.10 86.07 -20.13
Jul-23 32.25 52.92 85.17 -20.67
Aug-23 34.48 58.64 93.12 -24.16
Sep-23 34.47 53.84 88.31 -19.37
Oct-23 33.57 65.03 98.60 -31.46
Nov-23 33.90 54.48 88.38 -20.58
Dec-23 38.45 58.25 96.70 -19.80
Jan-24 36.92 54.41 91.33 -17.49
Feb-24 41.40 60.11 101.51 -18.71
Mar-24 41.68 57.28 98.96 -15.60
Apr-24 34.99 54.09 89.08 -19.10

Data Source: DGFT

The last above table only captures the merchandise trade (trade in goods). The last 2 columns deserve attention. The total trade is the sum of exports and imports and is a good barometer of total economic activity, jobs created and the total government revenues. The deficit is the excess of imports over exports and shows how much of the deficit has to be financed; either with services surplus or through other means. In the last 13 months, the average monthly total trade has been $91.84 Billion while the average monthly trade deficit in the same period has been to the tune of $20.34 Billion. However, it must be said here that the trade deficit has been under $20 Billion for the last 5 months in a row, and a combination of export thrust and import substitution appears to be working.

During the last 13 months, the highest total trade was achieved in February 2024 at $101.51 Billion while the lowest total trade was seen in April 2023 at $84.56 Billion. The highest trade deficit in the last 13 months was seen in October 2023 at $31.46 Billion, which is also the highest trade deficit recorded by India in any month in its history. The lowest trade deficit was visible in the month of April 2023 at $15.24 Billion. Things have changed for the better in the last 2 years. While exports are robust, imports have been gradually controlled by better vendor terms (like Russian oil) and through import substitution. At the same time, the services surplus has grown substantially in last 2 years, such that in some months, the services surplus almost wipes out the merchandise trade deficit.


Obviously, one of the key strategies to reduce the trade deficit has been to boost exports. Here are the star export performers in April 2024, based on the yoy percentage increase in exports. Electronic Goods (+25.80%), Tea (+25.74%), Organic & Inorganic Chemicals (+16.75%), Coffee (+15.87%), Tobacco (+13.22%), Spices (+12.27%), Drugs & Pharma (+7.36%), Cotton Yarn (+6.65%), and Carpets (+5.64%) were the key export growth drivers in the month of April 2024. The spike in electronics exports in recent months is largely from the big thrust to the manufacture and export of mobile phones in India. The China Plus One policy has surely worked in favour of India in this particular case.

In April 2024, the mix favoured the losers over gainers in the ratio of 17:13, which is a signal that export momentum has been seriously impacted by the Red Sea crisis. Electronics has not just gained traction, but has become the single biggest driver of the export basket in April 2024. The surge in export of mobile phones under the product linked incentive (PLI) schemes has made the big difference. In April, the quality of the export basket improved with value added products like electronic goods, chemicals and pharma playing a key role.


If boosting exports is one way to bring down the trade deficit, the other is import substitution. In the last one year, India has substituted Indian imports of OPEC oil with Russian oil due to its lower price. That has help keep the oil driven deficit in control. The second is the boost to defence by reducing defence imports, in-sourcing substantial needs and also boosting defence exports. That was amply visible in the month of April 2024. In fact, out of the 30 key items of imports, April 2024 saw 14 products reporting lower imports showing relatively favourable traction for the trade deficit reading for April 2024.

Major items in the trade basket that showed lower imports yoy in April 2024 included Sulphur & Unroasted Iron Pyrites (-71.75%), Pearls & Precious Stones (-21.12%), Raw and Waste Cotton (-16.31%), Wood & Wood Products (-14.11%), Coal, Coke, Briquettes (-11.71%), Artificial Resins (-10.23%), and Fertilizers (-8.3%). The lower imports were triggered by lower import demand due to the global demand slowdown, combined with the enhanced domestic output and import substitution policy.


In India, the Directorate General of Foreign Trade (DGFT) reports merchandise trade data, while the services trade data is reported with a one-month lag by RBI. The DGFT also provides indicative extrapolated figures of services trade for current month. Services trade surplus largely neutralizes merchandise trade deficit.

Macro Variables (Monthly) Apr-24 ($ bn) Mar-24 ($ bn) Apr-23 ($ bn) Change YOY
Merchandise Exports 34.99 41.68 34.62 1.07%
Merchandise Imports 54.09 57.28 49.06 10.25%
Total Merchandise Trade 89.08 98.96 83.68 6.45%
Merchandise Trade Deficit -19.10 -15.60 -14.44 32.27%
Services Exports 29.57 28.54 25.78 14.70%
Services Imports 16.97 15.84 13.96 21.56%
Total Services Trade 46.54 44.38 39.74 17.11%
Services Trade Surplus 12.60 12.70 11.82 6.60%
Combined Exports 64.56 70.22 60.40 6.89%
Combined  Imports 71.06 73.12 63.02 12.76%
Overall Trade Volume 135.62 143.34 123.42 9.88%
Overall Trade Deficit -6.50 -2.90 -2.62 148.09%

Data Source: DGFT and RBI

Here is what we read from the April 2024 analysis of India merchandise and services trade numbers. Our focus will be more on the services trade numbers here.

  • Services exports in April 2024 were higher 14.70% compared to the year ago period and also higher by 3.61% compared to the previous month of March 2024. The services imports were higher by 21.56% yoy while it was also higher by 7.13% on MOM basis. As a result, the services trade surplus in April 2024 increased by 6.60% on a yoy basis to $12.60 Billion. On MOM basis, the services trade surplus was marginally lower.
  • Services trade surplus arises from export of IT and other BPO services. In recent months, non-cyclical verticals like consultancy services to global clients, knowledge and innovation centres, global capability centres (GCC), outsourced legal / audit services etc, have assumed prominence. These have boosted services surplus in recent months.
  • How did services trade impact the overall picture of trade for April 2024? The deficit on merchandise trade account in April 2024 was wider by 32.27% yoy at $19.10 Billion. It was also sharply higher on MOM basis. However, this was only partially offset by the services surplus, which improved 6.60% on yoy basis. As a result, the overall trade deficit stood at a level of $-6.50 Billion, which is sharply higher on a yoy basis and also MOM.

What does this array of data mean for the current account deficit (CAD)?


It may be too early to put out extrapolation of CAD for FY25. The FY24 data itself is awaited and based on the final trade and services date for FY24, it looks like the current account deficit (CAD) would be around 1% or lower than that. For FY25, the economists are already pegging the CAD to be at around 1.25% of GDP, but these are early days still. For starters, there are several X-factors at this juncture. For example, the outlook for global trade and for oil prices remains uncertain. For now, it does look like the CAD for FY25 may be higher. But, the first thing we need to do is to await the CAD data for FY24, which will be released in the last week of June 2024.

Related Tags

  • CAD
  • CommerceMinistry
  • CurrentAccountDeficit
  • exports
  • imports
  • TradeDeficit
sidebar mobile


Read More

Invest Right News

BSE: Firing on all cylinders
10 Apr 2024|12:07 PM
Read More
Knowledge Centerplus

Logo IIFL Customer Care Number
1860-267-3000 / 7039-050-000

Logo IIFL Securities Support WhatsApp Number
+91 9892691696

Download The App Now

Knowledge Centerplus

Follow us on


2024, IIFL Securities Ltd. All Rights Reserved

  • Prevent Unauthorized Transactions in your demat / trading account Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors.
  • KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
  • No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."

www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.

  • 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
  • On an average, loss makers registered net trading loss close to Rs. 50,000.
  • Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
  • Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.
Copyright © IIFL Securities Ltd. All rights Reserved.

Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248

We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.