Trade deficit in Oct 23 is jarring-other macro factors pleasing!

India's trade deficit widened to a record high of $31.46 billion in October 2023, according to data released by the Ministry of Commerce and Industry. This was significantly higher than the $19.37 billion deficit in September 2023 and the $20.50 billion that economists had forecast.

(all the above figs in US $ Billions)

The widening trade deficit was mainly due to a sharp increase in imports, which grew by 26.2% year-on-year to $54.54 billion. This was driven by higher imports of crude oil, gold, and electronic goods. Exports, on the other hand, grew by a more modest 5.4% to $23.08 billion.

(Imports Figs above are in US $ Billions)

(the above Exports Figs in US $ Billions)

The widening trade deficit is a concern for the Indian economy as it puts pressure on the rupee and could lead to higher inflation. The government has announced a number of measures to boost exports, but in view of dampening Global Trade volumes which are exacerbated by wars in Europe and Middle East theaters , the exports may lag behind severely in the coming months of FY 24.The situation looks bleak with trade volumes falling till the end of first half of 2024.

Here are some of the reasons for India's widening trade deficit:

Rising global commodity prices: The prices of many of India's imports, such as crude oil, have been rising in recent months. This has made it more expensive for India to import these goods.
Weak global demand: The global economy is expected to slow down in 2023, which could hurt demand for India's exports.
Supply chain disruptions: The COVID-19 pandemic and the wars in Ukraine and Israel/Gaza have caused disruptions to global supply chains. This has made it more difficult and expensive for India to export goods.

The Indian government is taking a number of steps to address the widening trade deficit. These include:

Promoting exports: The government has announced a number of initiatives to promote exports, such as the Production Linked Incentive (PLI) scheme.
Diversifying export markets: The government is also trying to diversify India's export markets, with a focus on emerging markets in Africa and Southeast Asia.
Improving infrastructure: The government is investing in infrastructure to improve connectivity and reduce logistics costs.

But the short term outlook for Exports look uncertain and shaky which may have a bearing on Manufacturing and Services GDP, even though the domestic demand conditions are robust.

Inflation is well-behaved, IIPs, Composite PMIs, stable monetary policy despite Election spending liquidity buildup, aggressive Capex spending by both Central and State Govts, well managed Fiscal deficit backed up by robust tax collections(both Direct tax and GST ) etc. are all on even keel indicating good GDP nos.Only Trade deficit is the party spoiler!

Comments

Hanuman and Ganesha!

The two major loved deities of the Hindu pantheon are Hanuman and Ganesha. Let us dwell into the concepts and significance of these two dieties. Ganesha, the son of Parvati and Shiv, is worshipped first before starting any new job or work. Even if you want to start writing or reading , you invoke the blessings of Lord Ganesha who goes under various names- Ganapathi, Vigneshwar, Vinayak, and Pillayar in Tamilnadu. Ganesha Gayathri, Pancharatnam are some of the important Ganesha mantras and hymns. Adi Ganesha idol is in a Temple near Tiruvarur in Tamilnadu with a human face.The mythological story says that Shiv slew His head and then fixed the head of the animal that He saw first after this beheading of His son. Ganesha after that with the elephant head is worshipped as the wisdom god by Hindus. Why only Hindus. He is worshipped in Indonesia where He finds Himself in their currency notes. He is considered the destroyer of evil in Japan. In Mexico, Ganesha idols were said to h...

Shrinking middle class in India?-Data show Growing Middle class!

Key Findings from the SBI Eco wrap Report(25th Oct 2024) Income Inequality is Decreasing : The report uses the Gini coefficient to demonstrate a decline in income inequality in India. The shift is most noticeable in lower income brackets, with a substantial portion moving into higher income groups. This aligns with a rightward shift in the income distribution curve. ITR Filings are Increasing : The number of ITR filings has significantly increased, indicating a growing tax base. This growth is particularly evident in previously untapped states (Uttar Pradesh, Bihar, etc.), suggesting broader economic participation.Below is the chart which shows No. of tax payers in Different income Group in AY2014 and AY2024 which clearly shows that the bulk have moved up from Rs.1.5lac to Rs5 lac to Rs.2.5 lac to Rs.10 lac(highlighted in yellow colour) Growth in 'Crorepati' Taxpayers : The number of taxpayers earning over ₹1 crore has increased significantly, highlighting the expansi...

State of the Indian Economy: Navigating Global Uncertainties

The global economic landscape is rapidly evolving, with trade policy uncertainty emerging as the key driver of the near-term outlook. Recent US tariff announcements have stoked fears of a global trade war, with countries still working out their appropriate responses in this uncertain environment. Despite these external headwinds, the Indian economy has exhibited marked resilience. Although the weakening global economic outlook could impact overall growth through weaker external demand, India's domestic growth engines - consumption and investment - are relatively less susceptible to external pressures. Prospects for the farm sector have been boosted by the forecast of an above normal southwest monsoon for 2025, which could augment farm incomes and keep food prices under check. Headline inflation moderated to a 67-month low of 3.3% in March, mainly due to moderation in food prices. Global Economic Outlook: Trade Tensions and Market Volatility The global economic landscape is facing ...

We are what we are !!

Search This Blog