The sharp deceleration in exports growth in the previous two months was halted in September, bringing some respite on the trade front. Merchandise exports grew 4.9% on-year to $35.5 billion in September, compared with a meagre 1.6% growth in August.

Exports also grew sequentially¹ by 4.0% on-month in September. The improvement was largely led by higher oil and gems and jewellery exports in September. Rise in oil exports despite lower international commodity prices and export tax on some of the petroleum products was welcome.

That said, core (non-oil non-gold exports) continued to soften, reflecting the slowdown in India’s exports to the largest destinations, such as the European Union and the US. Exports to Asia are still holding up, although signs of weakness have started emerging in some economies, such as Hong Kong and Malaysia. That said, exports to China have already been declining for a while, as its economy reels under the impact of the property sector meltdown and a strict Covid-19 policy.

Merchandise imports grew a mild 8.7% on-year to $61.2 billion in September (down from 37.3% growthin August). Sequentially, imports have declined for the second straight month in September. While this is largely a reflection of lower oil import bill – thanks to softer global crude oil prices during August and September – core imports (non-oil, non-gold) too are seeing some moderation. To be sure, the correction in international crude oil prices after the OPEC+ decision to cut oil supply would push up the oil import bill again.

A sequential moderation in imports along with a rise in exports led merchandise trade deficit to soften to $25.7 billion in September from $28.0 billion in August. But it still remains large compared with $22.5 billion in September 2021.

For the first half of this fiscal, i.e., April to September 2022, merchandise exports grew 15.5% on-year to $229 billion, while imports have grown 38.1% to $379 billion. This has led trade deficit in the first half of this fiscal to widen to $150.2 billion from $76.2 billion in the year-ago period.

¹ On a seasonally adjusted basis