India's electronics, pharma, engineering goods exports beat global trade blues

Export of engineering goods rose to $97.95 billion during the April-February period of FY24, up from $96.76 billion a year ago.
Export of engineering goods rose to $97.95 billion during the April-February period of FY24, up from $96.76 billion a year ago.

Summary

  • In April-February of FY24, export of drugs and pharmaceuticals rose 9.4% to $25.02 billion, driven by demand from advanced economies like the US and Europe, while iron ore exports surged 154.55% to $3.64 billion.

New Delhi: Only a handful of Indian goods such as mobile phones and drugs witnessed a rise in their annual export value during the first 11 months of FY24 in a year that saw high interest rates globally curb demand and geopolitical tensions hurt international trade.

Goods that saw their exports value increase between April 2023 and February 2024 include agricultural produce, drugs and pharmaceuticals, cotton yarn and handloom products, electronic goods, iron ore, ceramic products /glassware and engineering goods, according to the latest commerce ministry data.

By contrast, major export commodities like chemical and allied products, textiles, gems and jewellery, marine products, organic and inorganic chemical products, petroleum products, plastic and linoleum products, ready-made garments and rice have seen a major drop in export value during the period.

Exports of electronic goods jumped 23.62% on year to $25.59 billion, according to data from the government’s Niryat website (National Import-Export Record for Yearly Analysis of Trade).

During the period, export of drugs and pharmaceuticals rose 9.4% to $25.02 billion, driven by demand from advanced economies like the US and Europe, while iron ore exports surged 154.55% to $3.64 billion.

The export of cotton yarn and handloom products rose by 6.75% to $10.59 billion, and that of ceramic products and glassware by 15.77% to $3.89 billion.

Export of engineering goods rose to $97.95 billion during the April-February period of FY24, up from $96.76 billion a year ago.

India Ratings expects goods and services exports to grow 5.8% and imports to rise 8.8% in FY25, against 1.4% and 13.2%, respectively, in FY24, but warned that protectionist policies in the West could hamper India's shipments.

"Although global supply chains have largely recovered to pre-pandemic levels, the recent increase in the use of restrictive trade policies combined with subsidies and industrial policies aimed at localizing production has accelerated the reshoring of activities in the US and European Union," it said. "Continuation of this trend may pose new risks for India’s exports, besides the tighter monetary policy in advanced economies which is constraining economic activity and global trade," it added.

Farm exports inched up to $29.74 billion, from $29.05 billion in the year-ago period.

Commodities that saw a large drop in exports include chemicals and allied products (-6.26%), gems and jewellery (-14.57%), textiles (-4.24%), petroleum products (-9.69%), ready-made garments (-11.41%), rice (-6.99%), organic and inorganic chemicals (-6.86%), and others (-17.23%).

India's electronics exports were driven by smartphone sales.

According to industry body India Cellular and Electronics Association (ICEA), mobile phone exports touched $10.5 billion during the April to December 2023 period, accounting for 52% of total electronics exports. In FY23, mobile phone exports totalled $11.1 billion, or nearly 43% of all electronic shipments.

However, India's exports of gems and jewellery and refined petroleum products fell significantly due to a weak global demand. Similarly, the country's export earnings from petroleum shipments fell steeply due to global demand slowdown, a rise in domestic consumption, and shrinking discounts on Russian oil.

India imports diamonds and crude oil since it doesn’t produce these commodities in any significant quantity. But it exports refined petroleum products, gems and jewellery, making value additions in the process.

Major economies such as the US and Europe, India's key export destinations, saw inflation rates shoot after the pandemic, prompting their central banks to raise interest rates and subdue consumption demand.

There are signs, though, that some of these factors hurting exports might ease this financial year.

India's free trade agreements (FTAs), with several of them currently being negotiated, are slated to push exports over time.

FTAs have emerged as the most important trade promotion tool for India, with the world's fifth-largest economy soon going to have such trade pacts with 71 countries, covering 74.7% of India’s exports, the economic think tank Global Trade Research Initiative said in a recent report.

"India targets to have an FTA with all major world economies in 2024-25. Beginning 2024, it is in the advanced stages of negotiating FTAs with the UK, Oman, USA, the EU, Switzerland, Norway, Russia, Sri Lanka and Peru," the report said.

"This means by the end of 2024, India may have completed or nearing completion of an FTA with all major economies except China. With China, we have a small 3,000 tariff line concessional margin of a preference-based trade agreement called Asia Pacific trade agreement," it added.

Meanwhile, the World Trade Organisation (WTO) expects global goods and merchandise trade to recover gradually during 2024, following a contraction in 2023.

In 2023, global trade fell 1.2%, hurt by geopolitical and economic challenges, after registering a 3% growth in 2022, the WTO said in its Global Trade Outlook and Statistics report.

As economic pressures ease and incomes rise, the volume of global merchandise trade will increase by 2.6% in 2024 and by 3.3% in 2025, it added.

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