Indian exports face bigger threat from Asia-Pacific than West: CRISIL

CRISIL also said that the share of the US and the EU in India's goods exports has been on the rise since 2021 and it is eating into the share of the APAC region

Indian exports face stronger headwinds from softer demand in the Asia-Pacific (APAC) region than from the imminent slowdown in the West, CRISIL said in its research "Quicknonomics" on Monday.

Citing data from the Ministry of Commerce and Industry, the rating agency said that, during April and May, the decline in Indian exports was the sharpest in the APAC region as compared to the USA, Africa, European Union, and the Gulf region.

During the two months, India's exports declined 11.4 per cent. Comparatively, exports to APAC were down 21.8 per cent. The USA and Africa followed APAC with a fall of 12.9 per cent and 8.6 per cent respectively. The fall in exports in the EU was 6 per cent. In the Gulf countries, it was 3.4 per cent.

Moreover, exports of 40 of 75 commodities declined during April and May.

According to the latest data released by the ministry, India's merchandise exports plummeted by 22 per cent to $32.9 billion in June as compared to the month last year. Indian exports have now fallen for five straight months.

CRISIL added that India's trade deficit with the APAC region has been widening due to lower exports and higher imports.

"What is worrisome is that while India's exports to APAC are faltering, imports from the region continue to rise. This has considerably widened the country’s trade deficit with the region and overall in the past two years," it said.

It added that while China remains the primary contributor to the country's trade deficit from the APAC region, the trade deficit with the APAC (ex-China) region is also rising.

However, it also said that the role of China in India's falling exports is less pronounced as compared to the other countries.

A structural shift?

CRISIL said that the share of the US and the EU in India's goods exports has been on the rise since 2021. It is eating into the share of the APAC region.

"The share of APAC in India's goods exports has been on the decline since the pandemic onset in 2021 — this could perhaps suggest a structural shift," it said.

In 2019, APAC accounted for 33 per cent of India's goods exports, more than the combined share of the US and EU at 30.4 per cent.

In 2023, however, APAC's share declined to 26.5 per cent and the combined share of the US and EU rose to 34 per cent. This trend continued as of April-May this year.