Merchandise exports reach 11-month high despite trade deficit widening: RBI

Rising exports: India's merchandise exports surged to an eleven-month high, reaching $ 41.4 billion in February 2024, marking the third consecutive month of growth at 11.9 per cent year-on-year. This positive momentum was driven by several key sectors, including engineering goods, electronic goods, chemicals, pharmaceuticals, and petroleum products. However, some commodities such as gems and jewellery, cereals, and marine products witnessed a decline in exports during the same period.

On the import front, February saw a second consecutive month of expansion, with imports reaching $ 60.1 billion, reflecting a year-on-year growth of 12.2 per cent. The contributors to import growth included gold, silver, electronic goods, and machinery. Conversely, imports of vegetable oil, pearls, and chemicals saw a decline.

Despite the buoyancy in both exports and imports, the merchandise trade deficit widened to $18.7 billion in February from US$ 16.5 billion in January. This widening gap was primarily due to the faster pace of import growth compared to exports. As per the apex bank, petroleum products accounted for the largest share of the trade deficit, followed by electronic goods.

Broadly, India's merchandise exports contracted by 3.5 per cent year-on-year to $ 395.0 billion during April-February 2023-24. Similarly, merchandise imports declined by 5.3 per cent year-on-year to $ 620.2 billion during the same period. As a result, the merchandise trade deficit narrowed to $ 225.2 billion, compared to $ 245.9 billion a year ago.

Despite the trade deficit widening in February, the overall trend suggests a narrowing deficit over the longer term. Petroleum products and electronic goods continue to remain significant contributors to the deficit.