Agriculture, engineering products set to propel export growth in Q1

Robust demand from key markets, rally in commodity prices help bring buoyancy

India’s merchandise exports have been rising consistently over the past seven months, signalling a gradual recovery from the disruption caused by the second wave of Covid-19.

Experts said that apart from a robust demand from key external markets, a sustained rise in outbound shipments can also be attributed to a rally in commodity prices, as well as weakening of the domestic currency.

“While exports are primarily driven by (external) demand, higher exports are the result of a combination of some other factors as well such a rise in commodity prices. Rupee has weakened marginally; so, some kind of export-push is also being provided by the prices. Steps taken by the government, such as credit guarantee schemes, are also helping small and medium enterprises in this space become more competitive,” said Madan Sabnavis, chief economist at CARE Ratings.

“Apart from these factors, a low base due to last year’s lockdown is also a crucial factor. But absolute numbers have also been impressive,” added Sabnavis.

According to preliminary data released by the commerce and industry ministry earlier this month, merchandise exports reached an all-time quarterly high of $95 billion during April-June 2021, up 85 per cent year-on-year. It is 18 per cent higher as compared to the same period in 2019-20.

Final data for the month of June will be released later this week.

The government is also working towards achieving another all-time high of $400 billion merchandise export target by the end of the current fiscal year.

As compared with the pre-Covid period, growth has been driven by export growth in sectors like iron ore, engineering goods, cotton yarn, electronic goods and agriculture products such as rice, among others.

According to the commerce and industry ministry, labour-intensive sectors are also seeing rapid growth, despite Covid-related disruptions. For instance, rice export has been on the rise since May last year. It grew 37 per cent in the quarter ended June 2021 to $2.4 billion compared with April-June 2019.

Similarly, in the case of labour-intensive sectors such as cotton yarn and handloom products, outbound shipments grew by a third to $3.4 billion in April-June 2021 compared with April-June 2019.

Over the last few years, India’s export basket has been largely unchanged, comprising engineering products, petroleum products, organic and inorganic chemicals, gems and jewellery and textiles.

According to the Federation of Indian Export Organisations (FIEO), many of the labour-intensive sectors, contributing significantly to India’s exports, are constantly losing their share in the global market. However, sectors such as electronic goods and agriculture products such as tea, coffee and spices as well as surgical equipment have performed well in the last five years. 

“There has been a rise in exports of agricultural products which is not a very good idea. Instead, India’s priority should be exporting more manufactured goods. This will help in job creation,” said Biswajit Dhar, professor at JNU.