India: Merchandise exports fall sharply in October
Merchandise exports shrank 16.6% annually in October, contrasting Septembers 4.8% increase. Octobers result marked the worst fall since May 2020. Meanwhile, merchandise imports increased 5.7% in annual terms in October (September: +8.7% yoy), marking the weakest result since January 2021.
As a result, the merchandise trade balance deteriorated from the previous month, recording a USD 26.9 billion deficit in October (September 2022: USD 25.7 billion deficit; October 2021: USD 17.9 billion deficit). Lastly, the trend pointed down, with the 12-month trailing merchandise trade balance recording a USD 282.6 billion deficit in October, compared to the USD 275.4 billion deficit in September.
Merchandise exports were expected to decline—due to a slowing global economy—but not as sharply as they did in October. The larger-than-expected fall may be due to the fact that Diwali—an important five-day long Hindu festival in India—took place this year in October and last year in November. The first day of Diwali is a public holiday and it is common for Indians to take days off work during the festival, potentially disrupting export operations.
Analysts at Nomura commented:
“October marks the first contraction in exports in the post-pandemic phase – the last time exports contracted was back in February 2021 – attesting to the increasingly challenging global environment, and Indias sensitivity to this global slump. We had flagged back in July that our base case is a recession in 2023 in most developed economies, which will continue to weigh on Indias exports, in line with the deepening downturn signalled by Nomuras leading index for Asian exports. Having said that, Novembers exports are likely to improve on account of more working days this year.”