India’s Foreign Trade during 2008-09 (April-March)*

Provisional data on India’s merchandise trade for 2008-09 (April-March) and commodity-wise details for April 2008 - January 2009 have been recently released by the Directorate General of Commercial Intelligence and Statistics (DGCI&S). This article reviews India’s merchandise trade on the basis of these data.

Highlights

• India’s merchandise exports during March 2009 at US$ 11.5 billion recorded a sharp decline of 33.3 per cent as against a substantial increase of 34.1 per cent registered in the corresponding month of the previous year. With exports recording a steady decline since October 2008, the growth in the overall exports during 2008-09 (April-March) at US$ 166.7 billion decelerated to 2.4 per cent (as against an increase of 28.9 per cent in 2007-08). This sharp deceleration was on account of deceleration/ decline in the export of textiles and textile products, gems and jewellery, leather products and agriculture and allied products and iron ore and minerals as these sectors have been adversely affected under the impact of demand recession, mainly in the developed regions.
  
  
• Imports during March 2009 at US$ 15.6 billion also showed substantial decline by 34.0 per cent as against a sharp increase of 37.6 per cent in March 2008, due to decline in both oil and non-oil imports, with the decline in oil imports being more pronounced. Imports have recorded a steady decline since December 2008 and the overall imports during 2008-09 at US$ 283.8 billion, experienced a growth of 12.9 per cent, much lower than that registered during the previous year (35.4 per cent) on account of deceleration in both oil and non-oil imports.
  
  
• Petroleum, oil and lubricants (POL) imports during 2008-09 at US$ 90.8 billion, grew by 14.0 per cent (as against an increase of 39.4 per cent during 2007-08). However, the average price of Indian basket of crude oil during 2008-09 remained higher at US$ 83.1 per barrel than US$ 79.2 per barrel during 2007-08 due to the impact of higher international crude oil prices that prevailed during the first half of 2008-09.

• Non-oil imports during 2008-09 at US$ 193.1 billion registered a lower growth of 12.4 per cent than that of 33.6 per cent a year ago, mainly due to deceleration in the growth in non-bulk imports, viz., capital goods and gold and silver.
  
  
• Trade deficit during 2008-09 widened to US$ 117.1 billion, an increase of US$ 28.6 billion (32.3 per cent) over the corresponding period of the previous year.

India’s Merchandise Trade during 2008-09 (April-March)

Exports

India’s merchandise exports, after recording a steady growth of 33.7 per cent during April-August 2008, showed deceleration in September 2008. Subsequently, exports recorded decline, viz., (-12.2 per cent in October ), (-20.1 per cent in November), (-5.2 per cent in December), (-22.4 per cent in January 2009), February 2009 (-21.7 per cent) and the highest decline in the month of March 2009 (-33.3 per cent) mainly exhibiting the impact of global financial turmoil and economic slowdown (Chart 1) . Consequently, the growth in overall exports during 2008-09 (April –March) at US$ 166.7 billion was sharply lower by 2.4 per cent than 28.9 percent during the year 2007-08 (Table 1 and Statements 1 and 2). Exports of labour intensive sectors such as, gems and jewellery, and ores and minerals witnessed a decline, whereas exports of textiles and textile products, and agricultural and allied products have registered a decelerated growth as these sectors have been adversely affected under the impact of demand recession, mainly in the developed regions, viz., the US and the EU.

The detailed commodity-wise exports data released by DGCI&S for the period April 2008-January 2009 revealed that the shares of engineering goods and chemicals and related products in total exports increased, while those of agricultural and allied products, ores and minerals, leather and manufactures, textiles and textile products, gems and jewellery and petroleum products declined (Table 2). Sector-wise, manufactured goods continued to maintain largest share at 65.6 per cent, followed by petroleum products (16.9 per cent) and primary products (14.9 per cent).

Growth in exports of primary products during April 2008-January 2009 at US$ 21.1 billion decelerated sharply to 2.3 per cent from 34.0 per cent during the corresponding period of the previous year. Within primary products, agricultural and allied products witnessed a sharp deceleration in growth from 42.3 per cent to 3.8 per cent, while the exports of ores and minerals declined by 0.9 per cent from the growth of 19.0 per cent a year ago. Among agricultural and allied products, while tea and tobacco showed higher growth, exports of rice, cotton, coffee, oil meal, spices, sugar and molasses and marine products exhibited deceleration in growth/decline (Statement 3).

Exports of manufactured goods during April 2008-January 2009 at US$ 93.2 billion recorded a lower growth of 13.2 per cent than 19.3 per cent a year ago. Within manufactured products, engineering goods exhibited higher growth, while other major items, viz., chemicals and related products, leather and manufactures, textiles and textile products witnessed a deceleration in growth. Exports of gems and jewellery declined during the period under review.

Engineering goods exports during April 2008-January 2009 at US$ 37.8 billion, which constituted more than one-fourth of total exports of India, continued to accelerate with 29.1 per cent growth, on top of 22.9 per cent growth recorded during the corresponding period of 2007-08, largely contributed by transport equipments, iron and steel and electronic goods. Exports of transport equipments to the major markets, such as Singapore, the US and the UK increased substantially on the back of strong export performance during the first half of the year.

Chemicals and related products exports during April 2008-January 2009 at US$ 19.1 billion registered a lower growth of 14.2 per cent than 18.6 per cent during the corresponding period of the previous year. All the constituents barring residual chemicals and allied products experienced a deceleration/decline.

Growth in exports of textiles and textile products, during April 2008-January 2009 at US$ 16.1 billion sharply slowed down to 3.0 per cent (10.0 per cent a year ago). All the major components, including the readymade garments, which accounted for about 50 per cent share in textiles and textile products exports witnessed a slowdown in growth.

Growth in the gems and jewellery exports, at US$ 15.8 billion recorded a sharp decline to 3.1 per cent during April 2008-January 2009 from 24.8 per cent growth a year ago, reflecting the recessionary conditions in the major export destinations for India’s gems and jewellery, viz., Hong Kong, the US and the UAE.

Petroleum products at US$ 24.0 billion, which constituted the second largest components of India’s exports, witnessed a sharp deceleration in growth to 9.4 per cent during April 2008-January 2009 from 39.1 per cent during the corresponding period of the previous year (Statement 3).

Imports

India’s merchandise imports witnessed a growth of 44.8 per cent during April-September 2008, and thereafter it showed a deceleration in the month of October (7.6 per cent) and November (10.2 per cent) and it declined in December (-1.0 per cent), January 2009 (-27.3 per cent),February 2009 (-23.3 per cent) and in March 2009 (-34.0 per cent) reflecting the slowdown in industrial activities due to global economic crisis. The overall imports during 2008-09 (April–March) at US$ 283.8 billion, recorded a lower growth of 12.9 per cent than 35.4 per cent recorded a year ago. POL imports during 2008-09 at US$ 90.8 billion, also recorded a lower growth of 14.0 per cent (39.4 per cent a year ago) [Statement 2]. The average price of Indian basket of crude oil during 2008-09 was at US$ 83.1 per barrel (ranged between US$ 41.2 – 132.2 per barrel) was higher by 4.9 per cent than US$ 79.2 per barrel (ranged between US$ 65.2 – 99.3 per barrel) during 2007-08 (Table 4). Growth in non-oil imports during 2008-09 also decelerated considerably to 12.4 per cent from 33.6 per cent a year ago.

Commodity-wise imports data for the period April 2008-January 2009 indicated 32.8 per cent growth in POL imports (31.9 per cent a year ago) under the impact of high crude oil prices which prevailed in the first half of 2008-09. During April 2008-January 2009, growth in POL imports in terms of volume, however, moderated to 7.5 per cent from 41.8 per cent growth during the corresponding period of the previous year. Non-POL imports witnessed a moderation in growth (from 30.9 per cent to 27.1 per cent), mainly due to deceleration in imports of items such as capital goods and gold and silver (Statement 5). In terms of percentage share, POL imports increased to 33.3 per cent from 32.3 per cent, while the share of capital goods, gold and silver showed decline (Table 5).

Source-wise, during April 2008-January 2009, OPEC had the highest share in India’s imports (33.5 per cent), followed by developing countries (32.4 per cent) and OECD countries (31.3 per cent) [Table 6]. China continued to be the single largest source of imports, with a share of 10.5 per cent in total imports, followed by Saudi Arabia (7.1 per cent), the UAE (6.6 per cent), the US (6.0 per cent), Switzerland (4.4 per cent) and Iran (4.3 per cent)[Statement 6].

Trade Deficit

The overall trade deficit during 2008-09 (April–March) at US$ 117.1 billion, was higher by US$ 28.6 billion (32.3 per cent) than the trade deficit of US$ 88.5 billion during 2007-08. Trade deficit on oil account during April 2008-January 2009 at US$ 59.5 billion, was higher by US$ 18.6 billion (45.3 per cent) than US$ 40.9 billion a year ago. Trade deficit on non-oil account during this period amounted to US$ 49.4 billion, higher by US$ 23.9 billion (93.3 per cent) than US$ 25.6 billion a year back. Thus the increase in the overall trade deficit was due to increase in both oil and non-oil trade deficit (Statements 1 & 2).

Global Trade

According to the World Economic Outlook (WEO) [April 2009] world output in 2009 is projected to decline by 1.3 per cent. Growth is projected to reemerge only in 2010, at just 1.9 per cent. The current outlook is exceptionally uncertain, with risks still weighing on the downside. A recent analysis by Asian Development Bank (ADB) in its Asian Development Outlook (ADO) 2009 is also of the view that, uncertainty clouds the outlook for the global economy and accordingly, ADO 2009 projects GDP in the G3 economies (US, Eurozone, and Japan) in 2009 to contract by 2.6 per cent and world trade volume to decline by 3.5 per cent in 2009 as against a growth of 6.2 per cent in 2008. A mild economic recovery is foreseen in late 2010, with growth in major industrial countries expected to average 1.1 per cent and trade volume to rise by 1.9 per cent.

Based on the provisional data from IMF’s International Financial Statistics (IFS), world merchandise exports, in dollar terms, which grew on an average 22.6 per cent during January-September 2008, declined by 1.1 per cent in October 2008 and the declining trend continued in the subsequent months as well, viz., November (-15.0 per cent) and December (-13.6 per cent) (Chart 2). The declining trend witnessed during the later part of 2008 continued during January 2009. Accordingly, the world’s merchandise exports, showed a sharp decline of 29.1 per cent as against a growth of 23.4 per cent during January 2008. Exports from emerging and developing economies also sharply declined by 26.8 per cent (as against a growth of 26.9 per cent a year ago). Similarly, advanced economies exports also declined substantially by 29.9 per cent (as against a growth of 21.0 per cent) (Table 7).

* Prepared in the Division of International Trade, Department of Economic Analysis and Policy. The previous issue of the article was published in RBI Bulletin, May 2009.