India’s merchandise exports contracted for the first time in nine months in June. During June, petroleum exports declined 33 per cent while non-oil, non-gems and jewelry exports contracted by 4.86 per cent. Among other major items, exports of gems and jewelry, readymade garments, chemicals and engineering goods also came down. Lower crude oil prices explain a portion of the contraction in the absolute level of exports and imports. The escalating trade war between the US and China and the rising protectionism have cast a shadow on India’s prospects for higher exports. The contraction in June is also consistent with certain global trends, which have impacted India’s exports in recent months. However exports are expected to revive by two per cent or three per cent in the coming months. The increase in customs duty on gold may curtail imports in the next few months, which would modestly shrink the size of the trade deficit.

India is contemplating an export promotion scheme, along with a production-based support scheme. The new export promotion scheme may replace the existing Merchandise Export from India Scheme, following the US decision to challenge India’s existing export subsidy schemes at the WTO. Global trade is projected to grow at 2.6 per cent this year.