India's exports of readymade garments (RMG) and raw textiles dropped by 12.1% and 17.5%, respectively, in February 2023. There was also a decline in handicrafts (down 28.3%) and leather (down 14.5%) exports during the same period.
The decrease in exports can be attributed to the anticipated slowdown in global growth, which is largely due to lower growth in advanced economies, such as the United States and the euro area, both of which are significant export markets for India. Additionally, a potential deceleration in domestic growth could lead to some softening in imports.
The shift in demand from goods to services, which is less import-intensive, is expected to continue, leading to a further slowdown in goods exports. The impact of monetary policy tightening could also intensify the decline in goods exports.
However, India's merchandise imports fell by a slightly lower 8.2% YoY to $51.3 billion in February, with core imports declining by only 2%, indicating the resilience of domestic economic activity.