Jewellery, Petro-Product Exports Shrink, Take Shine Off India's Foreign Trade

Nevertheless, a marginally better export performance in the third quarter of this year, mostly in services. enabled the share of exports in nominal GDP to rise slightly to 21.2 per cent after 21 per cent share in both Q1 and Q2. Exports backed by a surge in IT exports grew by a healthy in the October-December 2024 quarter.

The share of exports in real GDP (adjusted for inflation), according to second advance estimates of 2024-25, remained almost at the same level at 21.8 per cent for 2024-25 compared to the 2023-24 share of 21.7 per cent.

While service exports grew at a fast clip by a huge 14.5 per cent growth, merchandise or goods exports showed a tepid growth rate of 1.4 per cent during the same period. Goods imports grew by 7.4 per cent at the same time, leading to a US$ 242.99 billion deficit.

The non-petroleum goods trade deficit also increased to US$ 141.22 billion in April- January 2024-25 from a US$ 131.32 billion deficit in April-January 2023-24.

This corroborates the latest trade data, available from the Ministry of Commerce and Industry till January 2025. Total exports grew during April-January of 2024-25 by 7.2 per cent, mainly propelled by services exports.

Gems' Sparkle Diminishing? 

Top Commerce Ministry officials said it was "an alarming situation as far gems and jewellery were concerned". Lower demand in India's principal markets, resistance from Europe to buy diamonds that originate in Russia, and increasing replacement of natural gems with lab-produced stones, have been hurting the Indian gems and jewellery industry. 

The industry is mostly centered around Surat, Mumbai, and Jaipur, which have turned into global hubs for stone polishing and jewellery crafting. 

Said Rupa Dutta, former Principal Economic Advisor at the Ministry of Commerce and Industry, "Gold jewellery is doing well. What has been affected is the cut-and-polished stones segment. The G7 nations, our main buyers, were reluctant to buy diamonds originating from Russia. One good news is that the G7, which was going to embargo Russian diamonds from the middle of this year, has decided to give a time extension."

Dutta added, "the government is taking a number of counteractive measures including promoting sunrise sectors within the gems and jewellery market such as silver, lab-grown diamonds, studded jewellery etc, to grow back our heft in the global market."

The Red Sea crisis, weak demand from European buyers for petroleum products made out of imported Russian crude, has seen India's petro-product exports also contract sharply at the same time.

Non-petroleum and non-gems and jewellery trade deficit, however, narrowed slightly to US$ 96.88 billion in April-January 2024-25, from US$ 98.30 billion in the same period of 2023-24.

Troubled Times Ahead?

The stellar performance in the electronics goods sector saved the exports account of the country. It grew by 33.72 per cent during April-January of 2024-25.

Engineering goods and pharmaceutical products also performed well. With engineering goods exports growing by 9.82 per cent, pharma rose by 7.84 per cent. 

With President Donald Trump threatening to levy reciprocal tariffs unless India opens up its market more and buys more oil from it, one can expect the export market to remain turbulent in the months ahead.