Petroleum products, engineering goods drive India's export growth

Engineering goods, gems and jewellery, and finished petroleum products helped India achieve a compounded annual growth rate (CAGR) of 4.9 per cent in commodity exports between 2015 and 2019.

“Engineering goods and gems & jewellery are the two main exports accounting for 35.5 per cent of total in 2019. But there is a contrast in their shares. Engineering goods share has been fairly stable in the 22-24 per cent range while that of gems & jewellery has come down from 14-16 per cent in the first three years to 11-12 per cent in 2018 and 2019. There has been a decline in CAGR for gems & jewellery while that of engineering has been higher than the overall exports at 6.9 per cent”, a report by CARE Ratings noted.

Exports of petroleum-related products also grew at a higher rate of 7.8 per cent during 2019. The next three important products from the point of view of exports are drugs and pharma, readymade garments and inorganic chemicals. Growth in readymade garments has fallen by 2.1 per cent which is significant as this is one area where the exchange rate matters. Typically demand tends to be very price sensitive and a stronger rupee can work against growth in exports of this product. The other two have maintained their share with inorganic chemicals growing by 17 per cent.

Electronics exports grew by 4 per cent. Exports of electronics goods have registered CAGR of 18 per cent between 2015 and 2019, the highest among all commodities. Inorganic and agro chemicals rank second growing by 17 per cent.

Imports, too, grew at the rate of five per cent during 2015-19. The share of crude oil to the country’s import basket which was stable at around 22 per cent during 2015-17 has increased now to 26.7 per cent and has registered growth of 9.1 per cent in the four years. This can be attributed more to demand as well as price. The latter has had phases of periodic sharp increase in prices based on geo-political issues.

The report said the country’s trade deficit during April-December period of FY20n has narrowed to $118 billion from $145 billion. Though both exports and imports declined in 2019 over 2018, the fall in the latter was sharper and this contributed to the fall in trade deficit.

The report forecasts that India’s foreign trade will be driven mainly by growth factors in the global economy for exports and domestic industrial expansion for non-oil imports. The present status of low trade deficit though good from a BOP (Balance of Payments) perspective is reflective of low industrial demand which has to change.