2024-11-19 02:38:00
The report stated that India’s export sector is navigating multiple challenges, including geopolitical uncertainties and these factors could pose risks to India’s export performance.
It said “the surplus in services trade and robust remittances flow provide some comfort and should help keep the current account in safe zone”.
The report highlighted that the fiscal year began on a positive note, with steady growth in merchandise exports during the first quarter. However, the momentum faltered in the second quarter, as exports witnessed a contraction.
The situation improved however in October, when merchandise exports staged a remarkable comeback, growing at 17.3 per cent year-on-year–the fastest pace in 28 months. This rebound followed a meagre 0.5 per cent growth in September and an average contraction of 5.8 per cent in July and August.
In October, India’s exports surged to USD 39.2 billion, driven by robust growth in core exports (27.7 per cent) and the gems and jewellery sector (8.7 per cent). The key contributors within the core segment included engineering goods, electronic goods, chemicals, textiles, marine products, and rice.However, oil exports contracted during this period. Despite this recovery, sustaining the growth remains a concern amid external pressures.The report also mentioned that U.S. tariffs on Chinese imports, combined with China’s economic slowdown, have intensified competition in Asian markets, including India. This has led to aggressive exports from China, adding pressure on India’s trade balance.
The United States has announced tariff hikes on Chinese imports (and more could follow with Trump coming in as the new President). Coupled with the slowdown in the Chinese economy, this is triggering aggressive exports from China to Asian markets, including India”.
Additionally, growth in imports this fiscal has outpaced exports, widening the trade deficit–a trend that warrants close monitoring.
The report outlined that India’s services trade surplus and strong remittances will continue to provide stability, while the merchandise trade deficit remains a concern, these factors are expected to keep the current account within a safe zone. (ANI)
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How can India leverage its services trade and remittances to counterbalance challenges in the export sector?
**Interview with Dr. Anjali Sharma, Economist at CRISIL**
**Editor**: Thank you for joining us, Dr. Sharma. Your latest report highlights some concerning trends for India’s export sector amid potential tariff hikes proposed by Donald Trump. Can you elaborate on how these tariffs might impact Indian exports?
**Dr. Sharma**: Thank you for having me. The proposed tariff hikes could indeed create headwinds for India’s export sector, particularly impacting industries that are heavily reliant on international markets. With geopolitical uncertainties also at play, we’re seeing a complex landscape where Indian exporters may face increased costs and decreasing competitiveness.
**Editor**: The report mentions a surplus in services trade and robust remittances as buffers for the economy. How significant are these factors in mitigating the risks posed by the export challenges?
**Dr. Sharma**: They are quite significant. India’s services sector has been a strong pillar for our economy, with a consistent surplus that can help offset declines in merchandise exports. Additionally, the flow of remittances provides a crucial safety net, bolstering the current account and instilling confidence in our overall economic stability.
**Editor**: Noted. Your report points out that the fiscal year started positively with steady growth in merchandise exports but then faced a contraction. However, October saw a strong rebound. What were the driving factors behind this recovery in export performance?
**Dr. Sharma**: The recovery in October can be attributed to several factors, including improved global demand and better market access for certain goods. Specifically, sectors such as pharmaceuticals, textiles, and engineering goods played a crucial role in driving the increase, achieving a remarkable 17.3 percent growth year-on-year—the fastest pace we’ve seen in 28 months.
**Editor**: That’s encouraging news. Going forward, what strategies should India adopt to maintain this momentum in exports while navigating the challenges?
**Dr. Sharma**: India needs to focus on enhancing its competitive advantages in key sectors through innovation and technology. Additionally, diversifying export markets and strengthening trade relationships with countries that are less susceptible to geopolitical tensions would be crucial. addressing any domestic bottlenecks in production and logistics will also help sustain export growth.
**Editor**: Thank you for your insights, Dr. Sharma. It sounds like while there are challenges ahead, there are also opportunities for India to strengthen its export performance.
**Dr. Sharma**: Absolutely, it’s a balancing act, but with strategic efforts, India can overcome these challenges and possibly emerge stronger in the global marketplace. Thank you for having me.
