Oct-24 trade deficit spikes to $27.14 Billion on oil import surge

18 Nov 2024 , 09:15 AM

INDIA OCTOBER 2024 TRADE – QUICK DATA POINTS

For the month of October 2024, the merchandise trade deficit widened to $27.14 Billion amidst a sharp spike in exports. Total trade (exports plus imports) for October at $105.54 Billion, is the highest monthly trade reading for the last one year. Let us first look at the top drivers of the export story for October 2024. The key contributors to the export basket in September 2024 were Engineering Goods $11.26 Billion (+39.4%), petroleum products at $4.59 Billion (-22.1%), Electronic Goods $3.43 Billion (+45.7%), Gems & Jewellery $3.25 Billion (+8.8%), Organic & Inorganic Chemicals $2.72 Billion (+27.4%), and Pharmaceuticals $2.62 Billion (+8.2%). The key import contributors were crude & petroleum products $18.30 Billion (+13.3%), electronics goods $8.35 Billion (+6.8%), Gold $7.13 Billion (-1.4%), Machinery $4.63 Billion (+8.7%), and Organic & Inorganic Chemicals $2.39 Billion (-1.4%).

Let us talk about key export destinations and import sources. Top export destinations for October 2024 were United States $6.91 Billion, United Arab Emirates $3.73 Billion, the Netherlands $2.03 Billion, and Singapore $2.02 Billion. What where the big sources of imports of goods for India. For October 2024, the top import origin nations were China $9.61 Billion, United Arab Emirates $7.18 Billion, Russia $6.58 Billion, United States of America $3.74 Billion, Iraq $ 3.17 Billion, and Saudi Arabia $2.90 Billion. Clearly, oil makes up bulk of the imports into India

HOW MERCHANDISE TRADE EVOLVED IN LAST 1 YEAR

Here is the monthly data of merchandise exports, imports, and trade deficit over last one year. Merchandise trade deficit spiked to $27.14 Billion in October 2024.

Monthly Data	Exports ($ Billion)	Imports ($ Billion)	Total Trade	Trade Surplus / Deficit
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
May-24	38.13	61.91	100.04	-23.78
Jun-24	35.20	56.18	91.38	-20.98
Jul-24	33.98	57.48	91.46	-23.50
Aug-24	34.71	64.36	99.07	-29.65
Sep-24	34.58	55.36	89.94	-20.78
Oct-24	39.20	66.34	105.54	-27.14

Data Source: DGFT

How do the trade figures compare with the averages of the last 12 months. Firstly, it must be noted that the total trade figure of $105.54 Billion was the best run rate achieved in the full year. Over the last 1 year prior to the current month, the average merchandise exports stood at $36.46 Billion, while merchandise imports stood at $58.25 Billion. The October exports and imports are well above the averages. Also, for the last 1 year, the average total trade stood at $94.70 Billion while the average trade deficit stood at $21.79 Billion. Clearly, the total trade and the merchandise deficit have been much wider in October 2024.

TRADE GAP – WHAT BOOSTED EXPORTS AND WHAT REDUCED IMPORTS

Here is a quick look at the star export performers in October 2024, based on the yoy percentage increase in exports. Rice (+85.8%), Electronic Goods (+45.7%), Engineering Goods (+39.4%), Jute (+37.0%), Readymade Garments (+35.1%), Tobacco (+34.3%), Handicrafts (+32.7%), Coffee (+32.4%), Spices (+30.9%), Organic & Inorganic Chemicals (+27.4%), and Mica, Coal, ores (+25.0%) were the key export growth drivers in the month of October 2024.

Major items in the trade basket that showed lower imports yoy in October 2024 included Silver (-74.8%), Pearls / Precious stones (-29.5%), Coal/Coke/Briquettes (-28.3%), Leather & Leather Products (-19.4%), Newsprint (-16.9%), Transport Equipment (-11.8%), Project Goods (-6.2%), and Fertilizers (-4.0%). The top 5 import sources, in terms of change in absolute value of imports in October 2024 over October 2023 included United Arab Emirates (70.4%), Russia (26.0%), Taiwan (82.8%), Peru (142.7%), and Angola (425.3%).

TRADE DATA BREAK-UP FOR OCTOBER 2024

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

Macro Variables (Trade Related)	Oct-24 ($ Billion)	Sep-24 ($ Billion)	Oct-23 ($ Billion)	Change YOY (%)
Merchandise Exports	39.20	34.58	33.43	17.26%
Merchandise Imports	66.34	55.36	63.86	3.88%
Total Merchandise Trade	105.54	89.94	97.29	8.48%
Merchandise Trade Deficit	-27.14	-20.78	-30.43	-10.81%
Services Exports	34.02	30.61	28.05	21.28%
Services Imports	17.00	16.32	13.46	26.30%
Total Services Trade	51.02	46.93	41.51	22.91%
Services Trade Surplus	17.02	14.29	14.59	16.66%
Combined Exports	73.22	65.19	61.48	19.10%
Combined  Imports	83.34	71.68	77.32	7.79%
Overall Trade Volume	156.56	136.87	138.80	12.80%
Overall Trade Deficit	-10.12	-6.49	-15.84	-36.11%

Data Source: DGFT and RBI

Here is what we glean from the October 2024 analysis of India merchandise and services trade numbers. We shall focus more on the services trade numbers here.

• Services exports in October 2024 were higher 21.28% compared to the year ago period. The services imports were higher by 26.3% yoy. As a result, the services trade surplus in October 2024 increased by just 16.66% on a yoy basis to $17.02 Billion.
• Services trade includes IT and BPO services, consultancy services, knowledge and innovation centres, global capability centres (GCC), outsourced legal / audit services etc.
• How did services trade impact the overall picture of trade for October 2024? The deficit on merchandise trade account in October 2024 was lower by -10.81% yoy at $27.14 Billion. It was sharply higher on MOM basis. The services surplus improved 16.66% yoy. As a result, the overall trade deficit for October 2024 stood at $(10.12) Billion, compared to $(15.84) Billion in October 2023; which is sharply lower. This dichotomy is more because October 2023 had recorded merchandise trade deficit of over $30 Billion.

Let us now turn our attention to the trade data for FY25, which should be a reasonable extrapolation with 7 months of data available.

CUMULATIVE TRADE DATA BREAK-UP FOR FY25 (APR-OCT)

The DGFT reports merchandise trade data and extrapolated services trade data on a monthly basis and also on a cumulative basis for the fiscal year. Here, with 7 months of data, one can get a fair extrapolation of the picture for the full fiscal year FY25.

Macro Variables (Year-to-Date)	FY25 (Apr-Oct)	FY25 (Apr-Sep)	FY24 (Apr-Oct)	Change YOY (%)
Merchandise Exports	252.28	213.22	244.51	3.18%
Merchandise Imports	416.93	350.66	394.18	5.77%
Total Merchandise Trade	669.21	563.88	638.69	4.78%
Merchandise Trade Deficit	-164.65	-137.44	-149.67	10.01%
Services Exports	215.98	180.00	191.97	12.51%
Services Imports	114.57	97.39	102.32	11.97%
Total Services Trade	330.55	277.39	294.29	12.32%
Services Trade Surplus	101.41	82.61	89.65	13.12%
Combined Exports	468.26	393.22	436.48	7.28%
Combined  Imports	531.50	448.05	496.50	7.05%
Overall Trade Volume	999.76	841.27	932.98	7.16%
Overall Trade Deficit	-63.24	-54.83	-60.02	5.36%

Data Source: DGFT and RBI (Trade data in Billion $)

Here is what we read from the FY25 analysis of India merchandise and services trade numbers. Here FY25 refers to the first 6 months of the fiscal year (Apr-Sep). Our focus, once again, will be on the services trade numbers here.

• Services exports in FY25 were higher 12.51% compared to the year ago period. The services imports were higher by 11.97% yoy; showing a slight pick-up in recent months. As a result, the services trade surplus in FY25 increased by 13.12% on a yoy basis to $101.41 Billion. Obviously, this can only cover the goods deficit $164.65 billion partially.
• How did services trade impact the overall picture of trade for FY25? The deficit on merchandise trade account in FY25 was wider by 10.01% yoy at $(164.65) Billion. However, this was partially offset by the services surplus, which improved 13.12% to $101.41 Billion. As a result, the overall cumulative trade deficit for FY25 stood at a level of $(63.24) Billion, which is 5.36% wider compared to the first 7 months of FY24.

It looks like the current account deficit (CAD) for FY25 could be wider than in FY24, but closer to the CAD achieved in FY23.

CURRENT ACCOUNT DEFICIT OUTLOOK FOR FY25

For FY25, we only have actual data for Q1FY25 and the Q2 data will only be out by end of December 2024. In Q1FY25, the current account deficit (CAD) was 1.1% of GDP. That is higher than the previous year when it was just 0.6% of GDP. We can extrapolate the likely CAD from overall deficit, which stands at $63.24 billion. We can safely extrapolate full year current account deficit in the region of $80 Billion to $85 Billion. That would still be about 2.0% to 2.1% of FY25 nominal GDP. One thing is clear; CAD position in FY25 will be nowhere as flattering as FY24; and that is not great news for the Indian Rupee!