What explains the rebound in exports?
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New Delhi: Despite strengthening of the rupee, sustained economic recovery in the European Union, India’s largest export destination, and strong demand from Asian economies has led to India’s merchandise exports growing in double digits for the third consecutive month in April.
Among Asian economies during April-February of 2016-17 period, dis-aggregated data for which is available on the commerce ministry website, export growth to Vietnam (23.6%), Singapore (17.3%), Hong Kong (14.3%), South Korea (11.6%), Kuwait (21.2%), Malaysia (30.9%), Nepal (38.6%), Oman (10.7%), Russia (19.4%), Taiwan (46.9%) were in double digits at a time India’s overall exports grew at 2.27%.
The items that drove this recovery in April are petroleum products (48.77%) and engineering goods (28.21%). Gems and jewellery (15.01%), chemicals (24.01%) and ready-made garments (31.72%) also saw significant jump in shipments during the month.
The weak global trade environment over December 2014 to August 2016 led to a prolonged period of contraction in India’s exports—the second longest in history since the global financial crisis.
A slump in crude oil prices and global over-capacity in steel output had driven down India’s petroleum and engineering exports growth. While support measures by the government such as imposition of anti-dumping duties on several flat-steel products and minimum support price on steel products helped the sector regain its competitiveness in the international market, a pick-up in global crude oil prices led to higher export of petroleum products.
The continuous downfall in Indian engineering exports has been arrested in May 2016 after eight months of contraction and growth has been robust since then except in July when it again fell 14.25%. The revival in engineering exports was led by iron and steel exports that shot up 60.57% in 2016-17.
The recovery in engineering exports was led by the European Union that has the highest share (21%) in India’s global engineering exports during fiscal year 2016-17, followed by ASEAN+2 (16%) and North America (15%), according to an analysis by Engineering Export Promotion Council. All European nations falling under the top 25 engineering export destinations, including the UK, Germany, Italy, Belgium, France and Spain, recorded positive growth. In the January-March quarter, Euro area grew at an annualized 2%, faster than 0.7% reported for America’s GDP.
During April-February of 2016-17, iron and steel exports to Euro area rose 77.4% to $2.1 billion. Among other major items, exports of vehicles other than railway items ($2.7 billion) and aircraft and spacecraft ($1.1 billion) also saw robust growth to Euro area. While during April-February, overall exports to Euro area grew 4.32%, in February exports rose 16.24%.