The country’s merchandise exports contracted 12.2 per cent to $34.48 billion in December, mainly due to global headwinds, and trade deficit widened to $23.76 billion during the same period, official data released on Monday showed.

Imports in December also declined 3.5 per cent to $58.24 billion from $60.33 billion in the year-ago period. In December 2021, exports stood at $39.27 billion and trade deficit was at $21.06 billion.

During April-December of this fiscal, the country’s overall exports rose 9 per cent to $332.76 billion, while imports increased 24.96 per cent to $551.7 billion.

The merchandise trade deficit for the April-December 2022 period was estimated at $218.94 billion against $136.45 billion in the same period of 2021.

Commerce secretary Sunil Barthwal said that despite global headwinds, “India’s exports have held its head high… There are recessionary trends globally. So lot of headwinds we are facing.”

“The sequential improvement in exports benefiting from the pre-holiday shipments was not enough to stave off a YoY contraction in December, in light of the weak global demand,” Aditi Nayar, chief economist, Icra, said.

“Nevertheless, softness in prices of some commodities contained imports to an extent, stabilising the trade deficit around the previous month’s level, and well below the average of $26 billion seen in the six months ended October 2022.

“We believe the current account deficit has likely peaked in Q2 FY2023, and foresee a moderation to $25-29 billion each in the subsequent two quarters,” she said.

Exports are in negative territory because of a recession like situation, slowdown and rising inflation in most economies, A. Sakthivel, president of FIEO, said.

Trade with Russia

India hopes that rupee trade with Russia will pick up after the two sides resolve issues related to trade barriers and a payments mechanism, a senior commerce ministry official said.

Satya Srinivas, additional secretary in the ministry, told reporters that Russia, Sri Lanka, Mauritius and Bangladesh are keen on rupee trade.

India has been exploring a rupee settlement mechanism with Russia soon after Moscow invaded Ukraine in February but the countries have not formalised rules yet.

The country has become Moscow’s largest oil buyer after China, buying discounted crude well below a $60 price cap agreed by Western nations while also trying to close a growing trade deficit with Russia. India is looking to enhance exports of electronic items to Russia, he added.