Services exports pip goods for first time in 2024, merchandise deficit at record high

Amid the ongoing marriage and festive season in the country, gold imports surged over 3 times in November to $14.8 billion compared to $3.4 billion last year. The surge comes after the government had slashed duty on gold imports from 15 per cent to 6 per cent during the Budget announcement earlier this year.

On the other hand, electronic goods exports continued their strong performance surging sharply by 54.72 per cent to $3.4 billion and engineering goods exports also jumped 13.75 per cent to $8.89 billion in November compared to $7.82 billion during the comparable period last year.

“India’s non-petroleum exports are growing consistently, services exports are also growing sharply. The exports demand depends on several factors such as shipping cost and time taken by use of alternative routes. But India’s goods and services exports in comparison to the world are much faster in the last 10 years,” Commerce Secretary, Sunil Barthwal said.

“The Indian economy is growing at 7 per cent and the world economy is growing at 3 to 3.5 per cent and therefore India’s demand for imports will be much higher than the world. And if our import demand is higher than the world’s demand for our goods, there will be higher imports,” the secretary said. India’s merchandise trade deficit printed at an all-time high of $37.8 billion in November 2024 as compared to the average of $23.5 billion during April-October 2024, amidst a surge in gold imports to an unprecedented $14.9 billion in the month, as well as a relatively milder uptick in other imports, said Aditi Nayar, Chief Economist & Head Research Outreach, ICRA Ltd said.

“Such high levels of gold imports were likely driven by festive and marriage-related demand and are unlikely to sustain in the ensuing months, which would help to cool the upcoming merchandise trade deficit prints. Nevertheless, the adverse trade deficit print for November 2024 will result in a sharper-than-expected widening in India’s current account deficit in Q3 FY25,” Nayar said.

On services exports surpassing the merchandise exports as per the provisional numbers shared by the Commerce and Industry Ministry, former trade officer and head of think tank Global Trade Research Initiative (GTRI) Ajay Srivastava said that higher services growth has been a consistent trend and is now resulting in higher export values.

Between FY19 and FY24, India’s merchandise exports grew at a compound annual growth rate (CAGR) of 5.8 per cent, while services exports surged ahead at a robust CAGR of 10.5 per cent and at this rate, by FY2030, services exports are expected to reach $618.21 billion, edging past merchandise exports, which are projected at $613.04 billion, Srivastava said.

On goods exports decline, Federation of Indian Export Organisations (FIEO) President, Ashwani Kumar said that such a dip in exports is mainly on the back of continuing global economic uncertainties. The ongoing international trade disruptions along with the volatility in crude and metal prices have also played a key role in the declining value of exports to some extent, Kumar said.

“The rising tensions between Israel-Iran has continuously led to logistical challenges with regard to international trade getting impacted as most of our trade to Europe, Africa, CIS and Gulf region are happening through the Red Sea route or the gulf region prompting buyers to have little large inventories. The challenges with regard to trade finance still remain the key for the MSMEs as it is really impacting the competitiveness of Indian products in the global markets,” Kumar said.