Prelims level : Economics Mains level : GS-III Technology, economic development, environment, diaster management
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Why in News:

  • The estimates for foreign trade showed a sharp slowdown in merchandise export growth in April, 2019 to 0.64% from a year earlier.

Background: / what is the exports scenario?

  • There was a 31% surge in petroleum products shipments to overseas markets in April.
  • If this is removed, India’s goods export actually contracted by over 3% in dollar terms.
  • [In contrast, overall merchandise exports had expanded 11% year-on-year in March, 2019 with the growth in shipments excluding petroleum products.]
  • The slump in exports was fairly widespread, with 16 of the 30 major product groups reflecting contractions.
  • This is in contrast with the 10 categories that had shrunk in March.
  • Worryingly, shipments of engineering goods declined by over 7% after having expanded by 16.3% in March.
  • The traditionally strong export sectors all weakened in April.
  • These include the gems and jewellery, leather and leather products, textiles and garments, and drugs and pharmaceuticals sectors.
  • E.g. contraction in gem and jewellery exports widened to 13.4% in April, from 0.4% in March; it was 15.3% from 6.4% respectively for the leather segment
  • Likewise, the pace of growth of garment exports decelerated to 4.4% from 15.1% in March.

What is the case with imports?


  • Imports grew by 4.5% to $41.4 billion in April, accelerating from March’s 1.4%.
  • This was primarily because the purchases of crude oil and gold continued to increase.
  • The 9.3% jump in the oil import bill, from March’s 5.6%, can partly be explained by the rise in international crude prices. However, the 54% surge in gold imports reflects India’s unappeasable appetite for gold, calling for policymakers’ attention and action.
  • Excluding oil and gold, however, imports shrank by more than 2% in April.
  • This signals that import demand in the real productive sectors is largely balanced.

What are the Implications?

  • Jobs and demand – The traditionally strong export sectors are all key providers of jobs.
  • So any prolonged slump across these industries will impact jobs, wages and overall consumption demand in the domestic market.
  • Trade deficit – With merchandise imports outpacing exports, the trade deficit widened to a five-month high of $15.3 billion.
  • The widening trade shortfall will add pressure on India’s widening current account deficit (CAD).
  • Being at around $51.9 billion in the first 9 months of fiscal 2018-19, CAD had already surpassed the preceding financial year’s 12-month shortfall of $48.7 billion.
  • More challenges and limitations to trade and exports are ahead with the escalating trade war between the U.S. and China.
  • The impacts of this could be widespread on global growth.
  • Moreover, the rising military tensions in West Asia could potentially further push up oil prices, further increasing India’s import burden.
  • Given these, containing the trade and current account deficits seems significantly challenging and urgent measures are needed to boost exports.
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