India's September Exports Up By 5%, Imports Down By Nearly 3%

The Indian economy is doing something which economies dont normally do. Its managing to reduce the trade deficit while also boomingthis just isnt what we normally see. Most especially when the global economy itself is managing very marginal

The Indian economy is doing something which economies don’t normally do. It’s managing to reduce the trade deficit while also booming–this just isn’t what we normally see. Most especially when the global economy itself is managing very marginal growth. It is far more normal to see an economy running a rising trade deficit while experiencing strong growth. The greater wealth within the country sucking in imports that is. That this isn’t happening is a very good sign about what is happening internally to that economy of India, it’s getting generally more efficient at producing what people want.

The basic news:

Signalling a clear reversal of the continuous decline in Indian exports, official data on Friday showed September exports at $22.88 billion grew 4.62 per cent over exports recorded in the same month last year at $21.87 billion.

However, cumulatively for the six-month April-September period, exports were down 1.74 per cent in dollar terms at $131.4 billion, as against exports of $133.7 billion over the same period last year, as per data released by the Commerce Ministry.

Just to explain a little detail here. Indian economic figures are based upon the fiscal year rather than the calendar one. That fiscal year starting in April–I assume this is a hangover from British times as the British fiscal year also starts in April. The detail there being that it used to be March 25th, Lady Day, one of the quarter days upon which debts were settled and rents paid and so on. When we changed from the Julian to the Gregorian calendar this then moved to April 5 th as the start of the fiscal year although the quarter day stayed where it was. A little oddity, certainly, but also an interesting little example of the economic idea of path dependency. What is happening now depends to a great extent on what happened in the past and those past occurrences weren’t necessarily for any other reason than happenstance.

India, which is currently growing at the fastest pace globally, experienced a definitive turnaround last September when its exports rose 4.6 percent year-on-year (YoY) even as imports contracted 2.5 percent.
The country’s merchandise exports stood at $22.88 billion in September 2016 as against $21.86 in September 2015, while imports shrank 2.5 percent to $31.22 billion from $32.03 billion, enabling the country to narrow its trade deficit to $8.33 billion, a fall of 18 percent from $10.16 billion in September 2015.


The country is still, of course, running a trade deficit. So it would be a bit misleading to call this an example of export led growth in the manner of, say, China in recent decades. The full figures are here:

Oil imports during September, 2016 were valued at US$6886.36mn which was 3.13 percent higher than oil imports valued at US$6677.58mn in the corresponding period last year. Oil imports during April-September, 2016-17 were valued at US$39297.17mn which was 18.59% lower than the oil imports of US$48271.11mn in the corresponding period last year.

Non-oil imports during September, 2016 were estimated at US$24333.77mn which was 4.04% lower than non-oil imports of US$25357.74mn in September, 2015. Non-oil imports during April-September 2016-17 were valued at US$135112.45mn which was 12.26% lower than the level of such imports valued at US$153998.51mn in April-September, 2015-16.

What’s evident here is that there’s no specific reason. We can’t look to the oil price changes over time and say that they have driven this. Nor to any specific other change in the volume or price of some good or service. What we’re seeing is just a general increase in exports across many sectors and a general decrease in imports similarly. We should therefore conclude that this isn’t just some sectoral shift but rather a general improvement in the terms of trade of the entire economy. That bodes very well for the future of the Indian economy.

When global trade growth is sluggish at best, when global economic growth is, by the standards we use for global growth, in recession (under 3% global GDP growth is generally regarded as recessionary) to be able to both reduce the trade deficit and also have markedly strong domestic growth is to be doing very well indeed. The structural reforms of the economy seem to be working at least in part. And thus should continue of course.