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Exports of engineering goods have shown growth of above 20 per cent over a year before in each of the first five months of the current financial year.
This is despite the overall outbound shipment of goods showing marked volatility over this period. Overall export growth was in double-digits in May and June; the next three months delivered single-digit expansion. August's was the lowest, at only 2.35 per cent.
Engineering goods, however, continued to have a good run in each of these months. The lowest growth was 23.2 per cent in July and the highest at 26.2 per cent in April. These goods were level with refined petroleum products for the top slot in exports. In August, outbound shipment of engineering goods was $6.6 billion, the highest exporter earner, followed by petroleum products at $5.1 bn.
However, much of the raw material for engineering exports are imported. The import intensity of engineering goods is roughly 40 per cent on an average, says Ajay Sahai, director-general of the Federation of Indian Export Organisations. This means $40 million of imports are made to export goods worth $100 mn.
Experts attributed the engineering export growth to newer markets and newer products, such as automobiles and auto components, aircraft and spacecraft parts and products. Some of the rise could also be due to low growth in the corresponding months of the previous financial year but that holds for overall merchandise shipments, too.
"We have diversified engineering goods exports to new markets in Latin America, Confederation of Independent States and Africa," said Sahai.
For instance, engineering exports to Africa rose 20.8 per cent to $3.9 bn during April-August, 13 per cent of the total engineering export of $28.9 bn in these months. Exports to CIS countries in absolute amounts lagged a bit but picked up significantly in terms of growth. These were only $404 mn in these five months but this was a growth of 42 per cent over the $285 mn in the corresponding period of 2013-14.
Those to Iraq and Iran have also been on a rise due to the rupee export mechanism. India basically exports flat steel products to these countries. Exports to Iran more than doubled to $516 mn in April-August, against $256 mn a year before. Export of these items to Latin American countries, however, rose only 3.4 per cent, to $1.2 bn in these five months, against $1.18 bn a year before. Export of engineering goods to Sri Lanka, Nepal and Bangladesh saw a big rise.
Sri Lanka saw it almost doubling to $1.5 bn in April-August, over $781 mn a year before. It was the third biggest destination for India's engineering goods. Sri Lanka, Nepal and Bangladesh are in the top 25 markets for these exports. These 25 destinations took 72 per cent of these exports in April-August.
This diversification helped buffer the current slowing in a number of European Union countries, though that region continues to remain the top importer of these goods from here. Export to the region rose 12.9 per cent to $4.8 bn in April-August, over the $4.3 bn in the same period last year. The EU took 16.9 per cent of our overall engineering export.
The biggest country destination is America for engineering goods. It took 26.7 per cent more, at $3 bn in the five months, over $2.4 bn last year. Its share was 10.4 per cent of the total in these months.
"This shows that engineering exports are critically dependent on EU and US markets," said Anupam Shah, chairman, EEPC India, a body representing engineering exporters. He said this was despite The Generalised System of Preference (GSP) being in limbo since August last year. GSP, under which exports to the US got concessional duty treatment, had expired on July 31 last year. The US economy grew at an annual rate of 4.6 per cent during April-June, the fastest since end-2011. The economy had contracted 2.1 per cent in January-March 2014.
In the EU, exports of these goods to Germany, despite the latter's economy contracting 0.2 per cent in the April-June quarter, rose 7.6 per cent in April-August to $901 mn, against $837 mn in the same period last year.
Similarly, France, which has seen almost stagnant growth, saw engineering export from India rising 7.8 per cent to $433 mn in April-August against $401 mn a year before. The growth in August was 18.5 per cent, to $91.8 mn.
Goods diversify
Besides, there is a diversification in export of engineering goods. "We are finding acceptability in the US as well for automobile components," said Sahai. Besides, companies are using India as a manufacturing hub to exports cars from here. Two-wheelers are exported to Africa and Latin America.
Exports of auto and auto components was $5.4 bn in April-August, a rise of 20 per cent over the $4.5 bn of a year before.
This was the second highest category after iron and steel and products made out of these. Exports of iron and steel and their products were $6.8 bn in April-August, up 14.2 per cent over the $6 bn in the corresponding period of 2013-14.
Similarly, aircraft and spacecraft parts and products rose 52 per cent to $2.3 bn during April-August over $1.5 bn a year before.
Worries
There are worrying signs in some destinations beside the EU. The United Arab Emirates, second biggest country importer of our engineering goods after America, saw these exports from India contracting 44 per cent to $365 mn in August over $656 mn a year before. Singapore, one of the top five countries in these imports from here, took 4.5 per cent less in August at $103 mn, against $108 mn a year before.
China, sixth largest importer of our engineering goods, took 1.3 per cent less at $268 mn in August against $271 mn in August 2013; its economy faces slowing growth.
