A Crisil report indicates that despite signs of recovery in exports during September, the trade outlook remains uncertain.

New Delhi [India], October 18: A report by Crisil highlights that despite signs of recovery in export growth during September, challenges such as container shortages and geopolitical uncertainties continue to pose risks, making the outlook for merchandise trade uncertain.

The growing trade deficit is a cause for concern, especially with the US increasing tariffs on Chinese imports, which could lead to a rise in Chinese exports to Asian markets, including India.

However, strong services trade and steady remittance inflows are expected to offer some stability, helping maintain the current account in a secure position.

India's merchandise exports showed a slight rebound in September, rising 0.5 per cent year-on-year to USD 34.6 billion after two consecutive months of decline, including a 9.3 per cent drop in August.

This recovery was fueled by a 9.2 per cent increase in core exports, compared to a 2.4 per cent growth the previous month. Key sectors such as pharmaceuticals, engineering goods, organic and inorganic chemicals, and ready-made garments experienced significant growth.

On the downside, petroleum product exports, a major export category, fell by 26.8 per cent, continuing to weigh down overall export performance.

Gems and jewellery exports showed some sequential improvement after a period of weakness. The average price of Brent crude oil in September was USD 74.3 per barrel, much lower than the USD 94 average in the same period last year.

While the decline in crude oil prices helped reduce India's oil import bill, it negatively impacted the value of petroleum exports, contributing to the ongoing contraction in that sector.

On the import side, merchandise imports rose modestly by 1.6 per cent year-on-year to USD 55.4 billion in September. Oil imports continued to decline, falling by 10.5 per cent due to lower crude prices, following a steep 32.4 per cent drop in August.

Despite steady growth in core imports, the overall moderation in import growth helped narrow India's trade deficit to USD 20.8 billion in September, down from USD 29.7 billion in August, and close to the USD 20.1 billion recorded in September 2023.

Non-oil exports saw a solid growth rate of 6.8 per cent in September, compared to a minimal 0.1 per cent increase in August. Several sectors saw notable gains, including pharmaceuticals, which grew by 7.2 per cent, up from 4.7 per cent in the previous month.

For the April-September period, cumulative merchandise exports rose by 1 per cent to USD 213.22 billion, compared to USD 211.08 billion in the same period last year.