Express View on export data: Global headwinds

Source: The post is based on the article “Global headwinds” published in “Indian Express” on 17th August 2023.

Syllabus: GS3 – Indian Economy

Relevance: Exports from India

News: Recently released trade data by the Ministry of Commerce and Industry points towards a continuing weakness in India’s exports.

What does the data say?

In July, merchandise exports declined by almost 16 per cent to a nine-month low of $32.25 billion. Goods imports also fell by 17 per cent to $52.9 billion.

In the first four months of the financial year (April-July), exports and imports have now contracted by 14.5 per cent and 13.8 per cent respectively.

The disaggregated data shows that 19 of the 30 major export items have declined during April-July. These also include labor intensive sectors such as gems and jewelry, leather products, textiles etc.

However, electronic exports continue to grow at a robust pace, rising by 37.6 per cent during April-July.

What are the reasons for the decline?

Firstly, part of the decline can be traced towards lower commodity prices.

Secondly, weak global and domestic demand is indicated by the fall in both non-oil exports and imports.

In which region has seen the most decline in India’s exports?

As per an analysis by CRISIL, the decline in India’s exports has been more pronounced in the Asia Pacific region.

In the first two months of the financial year, exports to the Asia Pacific region declined by 21.8 per cent, followed by the US (12.9 per cent), Africa (8.6 per cent) and Europe (6 per cent).

As per this analysis, the share of Asia Pacific region in India’s goods exports has been on a decline since the beginning of the pandemic.

What should be done?

In the near term, slowing global demand and trade will continue to weigh down exports.

The IMF’s July update of World Economic Outlook has predicted slower growth for the world economy and world trade volume growth (goods and services).

Considering its broader economic implications such as on job creation and the current account, policy must focus on creating a conducive ecosystem to boost exports.