For all the talk of Make in India and giving a push for Made in India products, the consistent fall in exports does come like a slap on the face.
Sixth month in a row, India’s exports fell 1.7% to $25.97 billion in Jan v/s $26.41 billion (YoY). More shocking is that 18 of the 30 major export shipments dipped.
Though imports also dipped by almost 1% to $41.14 billion from $41.46 billion, the trade deficit widened to $15.17 billion from $15.05 billion.
As per the data released by Commerce Ministry, the fall in exports was led by engineering goods, gems & jewellery, readymade garments, rice, leather. On the other hand, exports of petroleum products, organic chemicals, electronic goods, cotton and man-made yarn, drugs and pharmaceuticals increased.
Premium basmati rice exports, as such have been on the decline to Iran due to US sanctions. Rice exports to Iran have dropped to 600,000 tonnes in the eight months from 900,000 tonnes (YoY). There is major worry about payments getting delayed and that’s why even till date, no new contracts have been signed with Iran. Currently, Iran owes some Rs.2000 crore to India as post the US sanctions, it is hard for Tehran to pay for its rice imports.
On the import front, India imposed restrictions on Malaysian palm oil imports, disrupting global edible oil trade flows.
The falling exports, apart from the global slowdown, can also be attributed to currency volatility and fluctuation in commodities prices. What is really worrisome now is the shadow of coronavirus. This has worsened the global sentiments further and exporters are currently facing a situation wherein shipments are getting delayed.
China is India’s third largest market for domestic goods, accounting for 5% of India’s exports in FY19. If this disruption continues for a few more weeks, it is bound to impact our trade balance further as imports from China will not come, especially for the pharma companies. Getting substitutes in a such a short span of time would be next to impossible. Similarly, all exports will also get delayed and that will indeed be a double whammy.
But at the same time, this crisis too presents an opportunity. India can step in where Chinese exports to other countries get impacted. This could prove to be a good time for the Indian manufacturers only if they are to match up to the standards of production.
For now, the news is that exports are floundering and we do not expect this to change immediately in the short term.