$400 Billion In Exports: What's Leading The Boom?

Engineering goods and petroleum products increased their share in India's merchandise exports in FY22.

<div class="paragraphs"><p>Containers sit stacked in a yard at Krishnapatnam Port. (Photographer: Dhiraj Singh/Bloomberg)</p></div>
Containers sit stacked in a yard at Krishnapatnam Port. (Photographer: Dhiraj Singh/Bloomberg)

India's exports have surpassed $400 billion in 2021-22 so far, having added nearly $110 billion through the year. With a rise of 37% on an annual basis, exports have risen to a record high in the ongoing fiscal.

Exports have crossed $400 billion nearly a decade after they first crossed the $300 billion-mark in 2011-12.

Engineering goods and petroleum products have increased their share in exports. Along with gems and jewellery, the three categories made up for half of India's merchandise exports. While categories like electronic goods and agricultural commodities saw a rise in exports, their share in outbound shipment has not risen.

The rise in exports is broad-based, with nearly all categories posting growth on an annual basis, said Prahalathan Iyer, chief general manager at the Export-Import Bank of India. The rise in exports cannot be attributed entirely to higher prices, said Iyer, adding that volume of outbound shipments has also increased across commodities.

Non-oil and non-gold exports rose to $284 billion in FY22 up to February 2022, a rise of 20% from FY21. Productwise data for March is not yet available. Their share has risen from 75.1% of all merchandise exports in FY20 to 75.8% in FY22 up to February 2022.

Engineering And Petroleum Products Gain

Engineering goods remained India's largest export item, contributing 26.9% of all merchandise exports in the first 11 months of FY22. Exports of engineering goods rose 32% upto February 2022 on an annual basis. Compared to the pre-pandemic year of FY20, exports in this category are up 28%.

Exports of petroleum products saw the sharpest rise at 114% from FY21, led by a rise in crude oil prices. Compared to FY20, they registered a rise of 30%.

Electronic goods, organic and inorganic chemicals also saw a rise in exports, even though their share in total exports remained the same as in FY20.

Gems and jewellery exports and readymade garment shipments lost share compared to the pre-pandemic year, while rice — India's single largest agricultural export — made up for 2.3% of all merchandise exports.

Arun Garodia, vice chairman of the Engineering Export Promotion Council, said that engineering goods exports are likely to account for 27-28% of all merchandise exports by the close of the financial year. The industry has benefited from a need felt by developed nations to diversify their supply chains beyond China. India was able to take advantage of the opportunity, Garodia said. Strong global demand has also helped boost engineering goods exports, he added.

The rise in petroleum products was led by demand and higher prices towards the second half of the year, said Iyer. Agricultural goods exports continued to benefit from strong domestic production and a surplus in key commodities like rice and wheat. This was not the case in other parts of the world, he said.

According to A Sakthivel, president of the Federation of Indian Export Organisation, the rise in exports is across sectors with growth seen by both the traditional employment-intensive and sunrise sectors. The addition of $110 billion in exports is despite logistics challenges, including container shortage, sky-rocketing freight rates and liquidity constraints, he added.

With an expected $40-45 billion likely to be added by services exports this year, over 50% of the incremental growth in GDP this fiscal will be contributed by the exports sector, Sakthivel said.

Imports Rise Alongside Exports

While exports have risen, imports are also likely to exceed the $600 billion level in FY22, a research note by Acuite Ratings and Research said. This means that India's current account deficit is likely to widen to 2.5-3% of GDP in the current year.

Imports are also poised to exceed $600 billion level in FY22, thereby resulting in total merchandise trade crossing $1 trillion mark for the first time.
Acuite Ratings & Research

We need to be cognizant of the significant tailwinds to merchandise trade from elevated global commodity prices, the note said. "However, high commodity prices also turn out to be a headwind for trade and current account deficits since India is a net importing economy."

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