Exports in April experienced a significant setback, contracting by 12.7 percent to $34.66 billion, marking the third consecutive month of decline. The decrease in export figures can be attributed to weak demand in key markets such as the European Union (EU) and the United States (US). Experts suggest that it may take several more months for the situation to improve, casting a shadow of uncertainty over the near-term outlook.

In contrast, imports witnessed a steeper decline of 14 percent, resulting in a trade deficit reduction to a 20-month low of $15.24 billion, according to the latest government data. The slump in imports can be attributed to multiple factors, including the cooling down of commodity prices and reduced demand for discretionary products like gems and jewelry. The downward trend in imports has persisted for the past five months, with April’s imports totaling $49.9 billion, down from $58.06 billion in the same month last year.

Santosh Kumar Sarangi, the Director-General of Foreign Trade, expressed concerns regarding the market’s performance, stating that both Europe and the US have witnessed a decline in demand. He emphasized that the demand scenario for the next 2-3 months does not appear optimistic. However, Sarangi remained hopeful that the situation would gradually improve starting from September.

Sarangi further highlighted the potential for a boost in global exports due to the opening up of the Chinese economy and an anticipated increase in demand from Europe and the US economies by August-September. To mitigate the impact of the export decline, he suggested diversifying into product categories with higher demand, such as electronic goods, oil meals, oil seeds, and agricultural goods.

In April, several export sectors experienced negative growth, including petroleum products, gems and jewelry, engineering goods, chemicals, and ready-made garments across all textiles. Aditi Nayar of Icra noted that the decline in the trade deficit was primarily driven by non-oil items, with the fall in crude prices partially offset by higher volumes.

The decline in exports and the substantial drop in imports pose both challenges and opportunities for the country’s trade balance. Efforts to revive demand and explore new avenues for export growth will be crucial in stabilizing the trade deficit and strengthening the economy in the coming months.