While services exports continued to report healthy growth, merchandise or goods exports declined to their lowest in nine months, falling 16% to $32.25 billion in July from $38.34 billion in the year earlier, data released by the commerce and industry ministry on Monday showed.

Imports during the month also declined by 17% to $52.92 billion from $63.77 billion in the year-ago period, narrowing the trade deficit to $20.67 billion.

Petroleum product exports recorded the steepest decline, plunging more than 40% in July from a year earlier due to softening commodity prices amid reduced demand. This was followed by a 27% decline in labour-intensive gems and jewellery exports.

On the other hand, electronic goods, coffee, pharmaceuticals and iron ore exports reported an increase.

Commerce secretary Sunil Barthwal said that global headwinds persist and noted the decline in exports and imports of several countries, including key Indian markets such as the US and Europe.

Barthwal, however, expressed optimism that India’s exports of goods and services during FY24 would surpass the previous fiscal year’s $776 billion.

Sectors that are doing well include electronics, and that means “India is integrating into global value chains”, he said.

Aditi Nayar, chief economist at Icra Ltd, said that non-oil exports remained steady, even as lower oil exports dampened the overall shipments in July relative to the previous month.

“Based on the available trends, we expect the current account deficit to widen to $11-13 billion in Q1 (June quarter) and further to $15-17 billion in Q2, with the monthly trade deficit likely to remain above the $20 billion mark in the next couple of months,” Nayar added.

Engineering Export Promotion Council of India chairman Arun Kumar Garodia said that engineering exports have declined for the fourth consecutive month this fiscal, with July shipments dropping 6.62% from a year earlier to $8.74 billion.

“The metals sector has significantly contributed to the declining trend over the past many months. Overall, the global demand has slowed, and, as a result, Indian engineering shipments to top destinations have shown negative growth,” Garodia said.

A. Sakthivel, president of the Federation of Indian Export Organizations, said sluggish global demand, especially in China and the European Union, coupled with the contraction in growth, has led to the continuous decline in exports in recent months.

Manufacturing across the Eurozone and the US has contracted due to persistent policy tightening by both the US Federal Reserve and the European Central Bank, he added.

“The main reasons for the moderating pace of growth in merchandise exports in 2023 have been the ongoing geopolitical tensions, disruptions in the global supply chain due to the Russia-Ukraine war, monetary tightening and recessionary fears, which have continuously led to a fall in consumer spending across the globe, especially in advanced economies,” Sakthivel added.

Updated: 14 Aug 2023, 10:17 PM IST