Merchandise exports from India are likely to remain robust during the rest of the year, even as key markets in the United States and European Union (EU) face an economic slowdown.
Data released by the commerce ministry show that in the April-July period, Indian exports have already reached $59.2 billion, which is 28 per cent of the export target of $200 billion for the current financial year.
In the same period last fiscal, a much lesser percentage of the $160-billion exports target for FY08 was achieved, but the target was met by the end of the fiscal.
While experts are analysing the 31.2 per cent rise in exports during July (the segment-wise export data is not available at the moment), higher overseas sales of petroleum products, chemicals and engineering goods is seen as the possible reason for the healthy export growth.
Moreover, the near-10 per cent depreciation in the rupee against the dollar has also resulted in better realisation of export income.
“Going by this rate of increase, the export target seems doable,” said Saugata Bhattacharya, vice president, Axis Bank.
Tushar Poddar, vice-president, Asia economic research, Goldman Sachs, says that despite concerns of a slowdown in developed markets like the US and EU, the downside to Indian exports is limited.
“First, exports to developed markets — the US and EU — are not as important as in the past. Nearly two-thirds of India’s exports now go to other regions, especially to China, West Asia and Africa. As these markets continue to grow, we believe demand for exports will sustain,” Poddar said in a report today.
Moreover, the recently finalised free trade agreement (FTA) with the 10-member Association of South-East Asian Nations (Asean) will also add pace to export growth as import duties will be brought down.
According to Poddar, high-skilled products from sectors like engineering goods as well as resource-intensive products have more potential in emerging economies like Brazil, Russia and China rather than traditional products like handicrafts and leather, which are exported to the US and EU.
The resource-intensive sector has seen high export growth rates owing to rise in prices of commodities.
“The large exports of refined petroleum, however, have more to do with refining capacity rather than any commodity endowment. Indeed, of the total value of about $25 billion of exports in 2007-08, only about 14 per cent represents value-added due to refining, the rest being oil imports. Be that as it may, volumes have also been rising. Further, in the near term, our commodities team does not expect commodity prices, especially oil, to decline substantially, which will continue to sustain export growth,” Poddar said.
While India exports more of petroleum products, light consumer goods, chemicals, as well as food products, other Asian countries like China, Korea, Taiwan and Japan have export interests in transport goods, machine and electronics. Thus, India’s export interests are mostly not in competition with these countries.
