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Sunday, June 16, 2024, 11:33 am

Sunday, June 16, 2024, 11:33 am

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January’s export figures indicate that domestic shipping problems are still widespread.

January's export figures indicate that domestic shipping problems are still widespread.
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India’s goods exports increased last month for the second consecutive month, although only slightly—3.1% higher than in December. Only the fourth month of 2023–24 has seen an increase in outgoing shipments; this year’s total item export value is down 4.9% to around $354 billion. The $36.9 billion in exports in January is 4% less than the December total, but it is still higher than the monthly average for this year. It is important to clarify that a decline in demand following Christmas is not out of the ordinary. The Houthi rebels’ deliberate actions to disrupt shipping lines operating in the Red Sea, thereby affecting the flow of goods to the European and American markets, cannot be solely blamed for this decline. For the most part, January’s trade figures indicate that the impact is not very concerning at this point, but several important sectors do appear to be suffering. While the labor-intensive gem and jewellery industry had a little decrease in January, the growth of engineering products exports stalled to just over 4%.

The dramatic drop in the goods trade deficit is noteworthy, even if there hasn’t been a wider impact from the Red Sea antics yet. The deficit touched a nine-month low of $17.5 billion just three months after reaching a record high of over $30 billion. The bright side is that some slack in imports of project goods and electronics has contributed to the recent reduction in import bills, suggesting a weakening of the economy’s incentives for investment and consumption. The government has expressed confidence that, in spite of several international challenges, India will surpass its record export performance of $776 billion in 2022–2023. However, given the declining prices of commodities, it is difficult to match last year’s $451 billion total in the products sector. Although services exports are expected to have increased by 6.3% this year, if they continue at this rate the total export figure for the year might approach $760 billion. There are still a lot of dangers and uncertainties in the prognosis for the upcoming year. Even if the U.K. saw the biggest sequential increase in retail sales since July 2020, there are conflicting or weak signals regarding demand patterns from nations like the U.S. and Germany. Cuts to interest rates are still a ways off. The use of longer routes may be necessary for several more months due to the Houthi factor, shippers have cautioned, despite the U.S.-led Operation Prosperity Guardian to safeguard commercial traffic across the Red Sea. Extended delivery durations combined with increased shipping and operating expenses from exports may necessitate price increases, which might further weaken the already fragile demand in some countries and prompt potential customers to hunt for more affordable choices for Indian goods.

Abhishek Verma


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