At first glance, a 14 percent fall in import of goods and a 12.7 percent drop in merchandise exports may point to coming global headwinds. Yes, signs of a global fall in commodity prices and slower global demand are writ large in last month’s trade data, but a deeper analysis actually points to a robust Indian economy. Here are a few heartening takeaways:

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1. India’s services exports seem untouched by the global slowdown; they grew 25 percent to $30.36 billion in April from a year ago. It appears that as the US and other western nations grapple with higher wage costs, more back-office business — accounts, risk management, compliance — is flowing to India.

2. Although imports have fallen 14 percent from a year ago, inbound shipments of machinery and iron and steel are up 15 percent, indicating Indian industry is ticking on fine with a healthy appetite for machinery and metal inputs.

3. Thirdly, while most categories of exports including petroleum products, gold, jewellery, and textiles have all been hit, India’s fledgling electronics exports are up 26 percent. That’s probably the Apple effect.

4. And finally, India’s trade account is hardly in deficit. Adding a goods trade deficit of $15.26 billion and a services surplus of $13.86 billion, the overall deficit is a paltry $1.38 billion. Indeed, the overall deficit has been in low single digits for every month in 2023, indicating the economy’s improved competitiveness. More importantly, a balanced current account gives policy makers some elbow room to take independent actions on the rate front without having to worry about the impact on the rupee.

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To detail the numbers: India’s goods imports in April have come in at a 21-month low of $49.9 billion, down over 14 percent from year-ago and month-ago levels. It’s an across-the-board fall — in petroleum, gold, coal, coke and chemicals.

However, as pointed out earlier, India consumed more machinery and metal imports. So it appears the fall in other imported items is more due to a decline in their prices rather than because India consumed less.

Goods exports have fallen 12.7 percent year-on-year and 9.7 percent month-on-month to $34.66 billion. Exports to most destinations have fallen, except to Japan, the Netherlands, Italy and the UK.

In short, it appears India’s domestic industry is in growth mode and is consuming capital goods imports, while India’s key exports, especially services and electronics, are surging despite a slowdown in large economies such as the US — all signs of India being an impressive growth story in a slowing world.

Now, what does this mean for the dollar-rupee? Given that there is hardly any trade deficit to talk of and with global funds attracted to India as one of the few growth stories, the rupee looks poised to strengthen, while the Reserve Bank of India appears equally determined not to let it appreciate.

The RBI has bought almost $25 billion from April 1 to mid-May. This buying of dollars kept the rupee in a tight range of 81.5 to 82.5 to the dollar. It also meant that the central bank has infused about Rs 2 lakh crore into the economy, providing some much-needed liquidity for growth even as it increases rates to quell inflation.

Going forward, resilient Indian exports and the resulting stability for the rupee will give the RBI elbow room to follow an independent monetary policy — i.e., pause or cut rates, even when the US Federal Reserve is in hawkish mode, since it has to worry less about a run on the rupee. Thus, the growing strength of India’s export performance is likely to have a many-sided positive impact.

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