Shift in trade balance comes despite govt’s promise to focus on Indo-Pacific region
Share of the Gulf region in India’s exports basket decline to 15.9% in 2018-19
NEW DELHI: India is now exporting less to Asian economies and more to Europe and America compared to 2014, when prime minister Narendra Modi took charge. This is despite progress on Modi’s promise to integrate more with the extended neighbourhood in the Indo-Pacific region.
The latest official trade data analysed by Mint shows that Asia’s share in India’s exports basket fell from 49.56% 2014-15 to 48.77% in 2018-19, while Europe’s increased from 18.17% to 19.54% during the same period. Combined exports to both North and South America jumped from 19.03% in 2014-15 to 20.89% in 2018-19.
Within Asia, the share of the Gulf region in India’s exports basket has declined from 19.48% in 2014-15 to 15.9% in 2018-19. However, the share of Asia, including ASEAN (10.25% to 11.37%), North East Asia (12.19% to 12.73%) and South Asia (6.6% to 7.56%), increased during the same period. In the Gulf region, India’s exports seem to be losing momentum to the UAE, which is India’s second largest exports market after the US, with its share declining from 13.41% to 10.64%.
India’s Look East policy, which has been a major pillar of its foreign policy since the early 1990s, was upgraded in the second half of 2014 by prime minister Modi, to an Act East policy, which focuses on the extended neighbourhood in the Indo-Pacific region. The key principles and objectives of Act East is to promote economic cooperation and cultural ties, besides developing strategic relationship with eastern neighbours.
In Europe, except the UK, which is going through the Brexit turmoil, the share of all major economies in India’s exports basket, including Germany, Netherland, Belgium, Italy and Spain, rose. The UK’s share declined from 3.01% in 2014-15 to 2.83% in 2018-19.
While the share of the US increased from 10.93% in 2014-15 to 13.68%, in Latin America, Brazil leads the pack with a rise in share from 1.35% to 1.92%.
When it comes to imports, India is now sourcing far less from Europe, and more from Asia and the US.
The rise in imports from Asia is due to increasing combined imports from China and Hong Kong, alongside a sudden surge in imports from countries such as Singapore (118%) and Vietnam (43.3%), in 2018-19, which has surprised even the government.
One fundamental and worrying shift in India’s trade profile is the declining significance of Africa, with its share both in exports and imports baskets falling over the last five years.
Africa’s share in India’s exports basket declined from 10.58% in 2014-15 to 8.66% in 2018-19, mostly due to loss momentum in exports growth to Kenya, Tanzania and the Mauritius. Its share in India’s imports basket also fell from 8.62% to 8.02% during the same period due to contraction of imports from Nigeria.