Merchandise exports to grow 3% in Q4 despite Red Sea hurdles: India Exim Bank

The Red Sea crisis has forced Indian goods to be shipped through longer, more expensive routes, hurting exports

Dhirendra Kumar
Published7 Feb 2024, 08:13 PM IST
Ships traveling through the Red Sea carry about 40% of the goods traded between Europe and Asia. (Getty Images)
Ships traveling through the Red Sea carry about 40% of the goods traded between Europe and Asia. (Getty Images)

The Export-Import Bank of India (India Exim Bank) has forecast a 3% growth in India’s merchandise exports in the final quarter of FY24 despite the ongoing disturbances in the Red Sea.

The bank predicts that India’s total merchandise exports will reach $118.2 billion by the end of March, with non-oil exports accounting $95 billion, marking a year-on-year growth of 4.55% in Q4.

This growth forecast is significant for India considering the disruptions in global trade caused by the ongoing Red Sea crisis, which has led Indian goods to be shipped through the longer route of the Cape of Good Hope.   

The positive growth rates are expected to be witnessed against the backdrop of the contraction seen during the first two quarters of the year. India’s trade deficit widened to $31.46 billion in October, with imports at $65.03 billion and exports at $33.57 billion. 

However, India’s goods imports in December totalled $58.25 billion, while its exports added up to $38.45 billion. 

The country’s merchandise trade deficit decreased to $19.8 billion in December from $23.14 billion in the same month a year earlier. Due to a rise in exports, India’s goods trade deficit fell by about 4% in December from November. 

The positive growth in India’s exports could be a result of the country’s strong GDP growth fundamentals and expected global demand for Indian goods, the bank said in its report. 

The rise in exports may also be attributed to the Israel war that, in turn, led to the intensification of the Red Sea crisis, it stated.   

With these forecasts, India’s total merchandise exports for FY24 are expected to be at $435.3 billion, while non-oil exports figures are likely to be maintained at the previous year’s level.  

However, oil exports are expected to remain subdued during the year, contracting by $12.5 billion, compared with FY23.  

Forecast of growth in India’s total merchandise exports and non-oil exports are released by Exim Bank during the first fortnight of May, August, November and February for the corresponding quarters.

In the first three quarters of this fiscal year (April-December 2023), India’s merchandise exports stood at $317.12 billion, down 5.7% annually, while merchandise imports stood at $505.15 billion, down 7.93% annually.  

Attacks on commercial vessels on the Red Sea by Houthi militants are disrupting global supply chains and driving up commodity prices.  

Starting from the Bab-el-Mandeb Strait and leading into the Suez Canal, the Red Sea offers the fastest sea route connecting Asia with Europe and North America. Alternative routes that shipping companies are forced to take are longer and costlier.  

Rating agency Icra Ltd has stated that India’s merchandise trade deficit at $19.8 billion in December was lower than its estimate of $22.7 billion, owing to a better-than-expected performance of exports that month.

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First Published:7 Feb 2024, 08:13 PM IST
HomeEconomyMerchandise exports to grow 3% in Q4 despite Red Sea hurdles: India Exim Bank

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