India's overall trade deficit shows marked improvement in April-December 2023
India witnessed a modest increase in merchandise exports in December 2023, with a marginal growth of 0.96% at USD 38.45 billion, compared to USD 38.08 billion in December 2022. This rise marks a continuation of the country's export sector's resilience amidst global economic challenges.
 
Key Contributors to Export Growth

According to information shared by the Union Ministry of Commerce and Industry, the official RBI report pinned major contributors to the growth to Engineering Goods, Iron Ore, Gems & Jewellery, Electronic Goods, and Drugs & Pharmaceuticals.
 
Engineering Goods notably saw an increase of 10.19% at USD 10.04 billion, the highest monthly export in the current financial year. Gems and Jewellery also improved significantly by 14.07% at USD 2.90 billion. Similarly, Electronic Goods and Drugs & Pharmaceuticals recorded their highest monthly exports for the financial year at USD 2.62 billion and USD 2.47 billion, respectively.
 
Agricultural Sector Performance
The agricultural sector continued its growth trajectory, with significant increases in exports of Tobacco, Meat, Dairy & Poultry Products, Spices, Fruits & Vegetables, Cereal Preparations, and Oil Seeds.
 
Trade Deficit and Overall Trade Performance
India's overall trade deficit showed a marked improvement, decreasing by 35.87% from USD 108.13 billion in April-December 2022 to USD 69.34 billion in the same period in 2023. The merchandise trade deficit also improved by 11.45% for the same period.
 
However, India's overall exports (Merchandise and Services combined) in December 2023 experienced a decline of 4.25% over December 2022, with a total of USD 66.33 billion. Overall imports in December 2023 also saw a negative growth of 7.18% at USD 71.50 billion.
 
The detailed analysis of India's ‘23 trade in December reveals that merchandise exports reached USD 38.45 billion, while merchandise imports were higher at USD 58.25 billion. The services sector also showed significant activity, with an estimated USD 27.88 billion in exports and USD 13.25 billion in imports. Consequently, the overall trade balance for the month stood at a deficit of USD 5.17 billion.

Sector-wise Growth Analysis
In December 2023, under merchandise exports, 17 of the 30 key sectors exhibited positive growth. These include sectors like Iron Ore, Tobacco, Meat, Dairy & Poultry Products, Spices, Fruits & Vegetables, and others. Conversely,
 
15 out of 30 key sectors in merchandise imports showed negative growth, including Sulphur & Unroasted Iron Pyrites, Transport Equipment, and Vegetable Oil, among others.
 
Impact of Global Factors
The decrease in imports by 4.85% to $58.25 billion was primarily driven by a decline in crude oil shipments, which fell by 22.77% to $15 billion. Despite a substantial 156% increase in gold imports to USD 3 billion, the overall trade scenario from April to December 2023 reflected a 5.7% drop in exports and a 7.93% contraction in imports.
 
Challenges and Resilience
Commerce Secretary Sunil Barthwal highlighted that despite the global economic slowdown and demand reduction in Western countries, India has maintained a positive trade balance with a reduced trade deficit. However, key sectors like petroleum products, garments, chemicals, and leather experienced negative growth. On the other hand, sectors such as plastic, electronic goods, engineering items, and gems and jewellery exhibited positive growth.
 
Services Trade Outlook
The estimated value of services exports contracted to USD 27.88 billion in December 2023 but rose to USD 247.92 billion during the nine-month period. Despite challenges like the Red Sea crisis, the ministry assured no strain on container availability, with additional fleets enlisted to maintain schedules. Nevertheless, escalated freight costs, insurance premiums, and extended transit times could significantly inflate imported goods' prices.
 
India's export sector continues to exhibit resilience in the face of global economic headwinds. While the overall exports and imports have shown a decline, the marginal growth in merchandise exports and the significant reduction in the trade deficit reflect the underlying strength of the Indian economy. The government's focus on diversifying export sectors and markets, coupled with strategic trade agreements, is expected to accelerate India's trade prospects in the coming years.