Slowing global growth and cooling demand are likely to shrink India’s goods exports by more than 2% in 2022-23 and grow just 1.5% next year, CARE Ratings said in a research report on Tuesday, signalling a sharp drop in outbound shipments over the next quarter.
India’s merchandise exports have grown 11.1% through the first eight months of the year to touch $295.3 billion, but the rating agency cited recent months’ trend of moderating exports to reckon that the full-year figure would be 2.3% lower than the record $422 billion achieved in 2021-22.
With major economies likely to experience a sharp slowdown and global trade growth moderating, India’s manufacturing sector, whose Gross Value Added to the economy contracted 4.3% in the second quarter, will feel the pain of lower external demand as is evident in the 4% drop in industrial output in October, economists at the rating agency pointed out.
“Sectors with high export intensity will specifically be hit hard by the ensuing global slowdown,” they said, identifying gems & jewellery, ceramic & glassware, leather & leather products, drugs & pharmaceuticals, engineering &electrical goods, and textiles as the most export-intensive sectors in manufacturing.
“Some of these export intensive-sectors like textiles and garments, gems & jewellery, leather products are also highly labour-intensive. Hence, slowdown in these sectors will have implications for the overall employment scenario in the economy,” they cautioned in the note.
India’s average monthly trade deficit of $25 billion so far this year compares with an average of $16 billion last year. CARE said it expected India’s overall trade deficit for the year to be $294 billion, or 8% of GDP, compared with $189 billion, or 6% of GDP, in 2021-22. This deficit could moderate to 6.9% of GDP in 2023-24 with easing commodity prices, it projected.
The current account deficit, which hit a 15-quarter high of 2.8% of GDP in the April-to-June 2022 quarter, is pegged at 3.6% of GDP for 2022-23, but may moderate to 2.2% next year, partly helped by lower commodity prices and partly by an expected easing in domestic demand, CARE said in the report.
“Region-wise analysis of trade balance data shows a worsening of trade deficit with China. Given that India has a large trade deficit with China, worsening growth prospects in China are worrying for the Indian economy. Moreover, with the U.S. and EU slowing down, India’s trade surplus with these regions has also been falling,” it pointed out in the report.