iifl-logo-icon 1
IIFL

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

January 2023 trade deficit sharply lower at $17.75 billion

16 Feb 2023 , 08:25 AM

This is a far cry from the peak trade deficit of $30 billion in July 2022. The January trade deficit figure of $17.75 billion puts much less pressure on the current account deficit for FY23. However, total trade which had gained a lot of traction amidst the commodity boom in early 2022, appears to have petered out.

Here is a quick take on total trade, which is material because it shows the total volume of trade and is key to job creation in the Indian economy. After staying above $100 billion for 4 months between March and July 2022, total merchandise trade (imports plus exports) tapered. Total trade fell to $95.82 billion in August, $96.61 billion in September, $86.47 billion in October, $87.87 billion in November and $92.72 billion in December 2022. Total trade for January 2023 fell further to $83.57 billion amid falling commodity prices.

Month

Exports ($ billion)

Imports ($ billion)

Trade Surplus / Deficit

Jan-22

34.50

51.93

-17.43

Feb-22

34.57

55.45

-20.88

Mar-22

42.22

60.74

-18.52

Apr-22

40.19

60.30

-20.11

May-22

38.94

63.23

-24.29

Jun-22

40.13

66.31

-26.18

Jul-22

36.27

66.27

-30.00

Aug-22

33.92

61.90

-27.98

Sep-22

35.45

61.16

-25.71

Oct-22

29.78

56.69

-26.91

Nov-22

31.99

55.88

-23.89

Dec-22

34.48

58.24

-23.76

Jan-23

32.91

50.66

-17.75

Data Source: DGFT

Several factors triggered lower trade deficit, apart from lower commodity prices. India has shifted to Russian oil (which accounts for 30% of oil import basket). This was combined with a consciously policy of import substitution where feasible. Global slowdown fears in the US, UK and EU resulted in lower spending and inventory accumulation in these regions and that has compressed the volume of global trade. 

How does the FY23 macro trade picture look?

For the first 10 months of FY23, the total merchandise exports are higher by 8.5% yoy at $369.25 billion while the total merchandise imports are higher by 21.9% at $602.20 billion. Cumulative total trade (imports + exports) for FY23 is up 16.4% at $971.45 billion while the total trade deficit for the year is sharply higher by 51.5% at $232.95 billion. While the merchandise trade deficit was expected to be closer to $300 billion for FY23 fiscal, the estimates have now been toned down closer to $270 billion.

On the subject of cumulative exports and imports, let us quickly look at the top-10 contributors to exports and imports for first 10 months of FY23.

Export Products Amount ($ billion) Import Products Amount ($ billion)
Engineering Goods

88.27  

Crude Petroleum

178.45  

Petroleum

78.58  

Electronic Goods

64.45  

Gems & Jewellery

31.61  

Coke / Coal

43.17  

Chemicals

25.40  

Machinery

37.47  

Drugs & Pharma

20.85  

Gold

29.09  

Electronic Goods

18.78  

Chemicals

28.52  

Readymade Garments

13.34  

Pearls & Stones

25.15  

Cotton Yarn

9.04 

Transport Equipment

22.52  

Rice 

8.98 

Resins / Plastics

19.48  

Plastic / Linoleum

7.06 

Iron & Steel

18.81  

Marine Products

6.87 

Vegetable Oil

18.10  

Data Source: Ministry of Commerce

On the exports side, the top 11 products account for 83.6% of the overall export basket for FY23. On the imports side, the top 11 products account for 80.6% of the import basket. Here are some major observations on the exports front. Among the top exported products, the yoy growth in petroleum products and electronic goods was extremely strong, with the latter attributed to the PLI scheme. Exports of cotton yarn as well as plastics and linoleum fell sharply in FY23 compared to FY22.

Let us now turn to the import story for FY23. There was a big surge in the import of coal, coke and briquettes, due to the shortage domestically. Fertilizers and petroleum also surged in terms of imports in FY23. Iron & Steel was another commodity where imports surged. Among the commodities that saw lower imports; there was a sharp fall in gold imports and in the import of medical and pharmaceutical products in FY23.

Electronics exports holds up the January 2023 story

Merchandise exports at $32.91 billion in January 2023 are lower -6.6% yoy. Sequentially, the exports were lower by -4.6% compared to December 2022. While exports held above the psychological $30 billion for the month, there was certainly some pressure coming from fears of a global slowdown in the light of the continued hawkishness of central banks.

There were several star export performers in January 2023. Electronic Goods (+55.54%), Oil Meals (+48.89%), Oil Seeds (+23.81%), Iron Ore (+21.00%), Rice (+18.80%) and Fruits & vegetables (+14.57%) were the key export growth drivers. In the month of January 2023, the export losers outnumbered the export gainers by a ratio of 16:14.

There were a number of export laggards in January 2023. Cotton Yarn (-37.42%), June Manufacturing (-34.12%), Plastics & Linoleum (-30.81%), Carpets (-27.42%), Coffee (-24.31%), Manmade fibre (-21.12%) and Gems & Jewellery (-19.28%) lagged in terms of the exports. Non-petroleum and non-jewellery exports in January 2023 stood lower at $25.35 billion compared to $27.41 billion in January 2022. 

Imports fell sharply in January 2023 led by precious metals

Merchandise imports for January 2023 stood at $50.66 billion, down -3.6% yoy. Imports were -13.02% lower on a sequential basis. The sharply lower imports can be partially attributed to the slowdown fears in the Western world as well as a greater focus on import substitution by the Indian government through its PLI scheme.

The big import surge in January 2023 came from Newsprint (+133.82%), Project Goods (+123.81%), Iron & Steel (+22.71%), Optical Goods (+21.86%), Crude Petroleum (+18.76%), Pulp & Paper (+18.58%), Transport Equipment (+13.02%) and Vegetable Oils (+7.85%). Major items in the basket that showed lower imports yoy in January 2023 were Silver (-82.05%), Gold (-70.76%), Sulphur & Iron Pyrites (-64.44%), Precious Stones (-29.65%) and Raw Cotton (-19.49%). The lower imports were largely triggered by the sharp fall in precious metal imports, which is a positive signal.

Current account deficit now looks manageable

The trade deficit for FY23, which was originally pegged at around $300 billion, now looks to edge closer to $270 billion. That is still substantially higher than last year, but certainly manageable compared to our apprehensions around 4-5 months back. Here is a quick view of overall deficit combining services and merchandise trade to give a good proxy for the current account deficit.

Particulars

Exports FY23 ($ bn)

Imports FY23 ($ bn)

Surplus / Deficit ($ bn)

Merchandise trade $369.25 bn $602.20 bn $(-232.95) bn
Services Trade # $272.00 bn $150.99 bn $+121.01 bn
Overall Trade $641.25 bn $753.19 bn $(-111.94) bn

Data Source: DGFT (# - DGFT estimates due to 1-month lag in RBI reporting)

The overall trade deficit, which is a combination of the merchandise trade deficit and services trade surplus, had surged from $(111.03) billion in November 2022 to $(118.12) billion in December 2022. Thanks to lower merchandise imports and higher services surplus, this overall deficit has compressed to $(111.94) billion in January 2023. That raises hopes of the overall deficit ending closer to $130 billion and poses less of a challenge to CAD. 

That should translate into current account deficit of under 4% of GDP. That is high in absolute terms, but not as bad as the 4.5% envisaged after the September quarter CAD numbers were announced. Imported inflation remains a concern, although the persistently improving services surplus should come as a blessing in disguise for the current account deficit (CAD) for FY23.

It remains to be seen, if Commerce Ministry gives a last minute boost to exports of goods and services in the last 2 months of FY23. That may not change the narrative on CAD, but would make it a lot more palatable.

Related Tags

  • Jan trade deficit
  • January trade deficit
  • Merchandise trade deficit
  • trade deficit
sidebar mobile

BLOGS AND PERSONAL FINANCE

Read More
Knowledge Centerplus
Logo

Logo IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000

Logo IIFL Securities Support WhatsApp Number
+91 9892691696

Download The App Now

appapp
Knowledge Centerplus

Follow us on

facebooktwitterrssyoutubeinstagramlinkedin

2024, IIFL Securities Ltd. All Rights Reserved

ATTENTION INVESTORS
  • 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.

RISK DISCLOSURE ON DERIVATIVES
  • 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

plus
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.

closeIcon

Get better recommendations & make better investments

Invest wise with Expert advice

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