Slackening demand in developed economies has hit outbound shipments from India sharply even to countries and regions with which we have inked economic partnership and free trade agreements for most part of this financial year. Emerging market economies use exports from India to sell it to advanced nations by adding value.
Latest data available shows, India’s exports to the 10-member bloc of Association of Southeast Asian Nations (Asean) declined by 18.6% to $19.17 billion in the first eight months of the financial year as compared to exports of $23.55 billion recorded in the corresponding period in 2011-12.
While exports to Singapore (India’s largest export destination in the Asean region) decreased by a steep 27% to $8.18 billion, outbound shipments to Indonesia and Malaysia fell by 17.34% ($3.24 billion) and 5.95% (to $2.28 billion) respectively in the April-November period in 2012-13.
India has signed Comprehensive Economic Co-operation Agreements (CECA) with Singapore and Malaysia and is negotiating for a bilateral market opening pact with Indonesia. Besides, final round of talks are on to close a bilateral trade pact with Thailand.
Ajay Sahai, director general, Federation of Indian Export Organisations (FIEO) said, “Our exports to nearly all countries in the Asean region have declined in the first eight months of the financial year except for Thailand, Philippines and Cambodia. The issue is the low penetration in markets with which we have these trade agreements. They are all export-oriented advanced economies and with markets in United States and European Union under stress, they have been scaling down manufacturing activity. The demand for raw materials and intermediary products from India has consequently fallen.”
Overall, exports declined by 5.5% to $214.1 billion in the April-December period as compared to $226.5 billion reported in the corresponding period last fiscal. Imports from India contracted by 0.71% to $361.3 billion compared to $363.8 billion over the period. This has resulted in widening the trade deficit by seven% to $147.1 billion against $137.3 billion in the first three quarters of the current fiscal year.
A recovery in outbound trade from India seems unlikely in the immediate future, said officials in the Ministry of Commerce. A senior ministry official said, “The World Trade Organisation (WTO) cut growth forecasts for global trade to 4.5% in 2013 from the earlier estimate of 5.6%. In fact, this time, we seem to be set for a bigger crisis because unlike in 2008-09 when only advanced economies were under pressure, emerging markets too have been impacted now.” Apart the Asean countries, while India’s exports to Japan increased marginally by three% to $3.73 billion, outbound trade to Korea dropped by 10.78% to $2.66 billion in April-Nov 2012.
India and the Asean - which comprises Brunei, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam - inked a free trade agreement on goods in August 2009. In December last year, India and Asean finalized the FTA in services and investments which is scheduled to be implemented by the end of 2013.
