Context: India’s goods exports dipped in December 2024, while imports showed growth. However, the trade deficit narrowed to a three-month low.
Relevance of the Topic:Prelims: Basic idea of the key trends in External Trade.
Present Status of External Trade
- Exports of Goods: Goods exports contracted 1% year-on-year in December 2024, totaling slightly over $38 billion.
- Import of Goods: Imports grew 4.9% to almost $60 billion.
- Merchandise Trade Deficit narrowed to a three-month low of $21.9 billion.
- This reflects significant improvement from November’s record gap of $31.8 billion.
- Gold Imports: grew by $4.7 billion in December.
- This is the corrected data by the government after rectifying an error of “double counting”.
- Petroleum imports rose 2.2% to $15.3 billion in December.
- Petroleum product exports declined sharply by 28.6%, standing at $4.9 billion.
- Trade deficit:
- On a year-on-year basis, December’s trade deficit was 17% higher, compared to December 2023.
- Total deficit through the year increased by 11.1%, reaching $210.8 billion.
Analysis of External Trade Data
- Reasons for export blip: Volatility of gold and petrol prices shooting up are the main factors behind fall of exports.
- Consistency of the export sector: Shipment values have grown in every quarter through the 1st nine months of this financial year (FY 2024-25).
- This highlights the resilience of the export sector during a challenging global economic environment.
A tariff war by the incoming U.S. administration could throw up new opportunities for India. A focused export strategy for key markets like the U.S., the continuation of measures like the Interest Equalisation Scheme, and a resolution of GST-related export challenges are necessary to ensure sustained growth.