India’s Export Recovery Lags As Asian Peers Race Ahead

India’s post-Covid export performance has lagged compared to other Asian economies like Vietnam, Thailand and Bangladesh.

A gantry cranes loads a shipping container onto a truck from a ship docked at the Jawaharlal Nehru Port, operated by Jawaharlal Nehru Port Trust (JNPT), in Navi Mumbai, Maharashtra, India, on Saturday, Dec. 16, 2017. Photographer: Dhiraj Singh/Bloomberg
A gantry cranes loads a shipping container onto a truck from a ship docked at the Jawaharlal Nehru Port, operated by Jawaharlal Nehru Port Trust (JNPT), in Navi Mumbai, Maharashtra, India, on Saturday, Dec. 16, 2017. Photographer: Dhiraj Singh/Bloomberg

India’s exports have rebounded in recent months as the global economy slowly opened up after a Covid-induced shutdown, but the pickup in outbound shipments has lagged that of other Asian economies.

Comparative data of export growth on a three-month moving average basis showed that Vietnam, China and Taiwan have seen the strongest revival, followed by Bangladesh. India and Indonesia have lagged. A moving average is used as it helps smooth out short-term fluctuations over a given time frame.

Vietnam, an exporter of electronics, textiles and machinery, among other items, saw exports rise by 12% on a three-month moving average basis, according to data from DBS Bank. China and Taiwan have seen close to double-digit growth too. Bangladesh has seen 1.3% growth in exports on a three-month moving average basis.

India’s export performance has been patchy. The contraction in shipments started to ease in June and exports returned to growth in September. Outbound shipments fell once again in October, dropping 5%.

On a three-month moving average basis, exports were down 3.9% as of October.

Asia’s recovery is led by China, and China’s recovery is led by exports, which have been above pre-Covid levels since mid-year, said a November 2020 research note by Moody’s Analytics. Acceleration in China’s international trade is being felt elsewhere in the Asia-Pacific region, it said, adding that Vietnam, Singapore, Taiwan, Malaysia and New Zealand are other Asia-Pacific economies that have reported a sharp rise in exports.

In India, like in Japan, Thailand, Philippines, and Indonesia, trade is rising slowly but is not yet at pre-pandemic levels, the report said.

Radhika Rao, economist at DBS Bank, said there is a clear updrift in regional export performance this year notwithstanding the pandemic. But the extent of buoyancy differs across countries, with China, Taiwan and Vietnam among the front-runners.

A key differentiator in export performance is the extent of existing integration in global supply chains, said Manoj Pant, director of the Indian Institute of Foreign Trade. Countries like Vietnam have benefitted because of this, Pant said.

India is not among the exporting countries that are a part of the global supply chains. The country has, by and large, stayed out of the world’s supply chains in apparel for instance.
Manoj Pant, Director, Indian Institute of Foreign Trade

Pant said the nature of foreign trade has changed and trade is now largely in intermediaries rather than in final goods. As such, exporters of intermediary products may have the upper hand.

To be sure, certain categories of Indian exports have also done well. Pharmaceuticals and chemicals are among them. A pick-up in agriculture exports has also helped improve overall performance, Pant added.

Export categories that have remained weak include refined petroleum products, gems and jewellery and machinery. These are all likely to recover with a lag, Pant said.

The divergent export performance across countries can also be explained by the fact that the pattern of trade has shifted, with concentrations in tech industries and medical equipment and supplies, showed the analysis Moody’s.

Outperformance remains differentiated and concentrated in certain pockets such as electronics, driven by computers and consumer electronics, along with pharmaceuticals and inputs for PPE-related products. Performance of traditional sectors, particularly those counting on a lift in discretionary consumption, has been uninspiring.
Radhika Rao, Economist, DBS Bank

Geographical Divergence

Exports to the United States, India’s largest export destination, continue to perform well but the South Asian nation hasn’t gained share of exports to this key market.

According to country-wise data available with the United States Census Bureau on imports into the country, China’s share rose to over three-fourths of total imports on a three month moving average until September 2020. Most other exporters, including India, have only managed to maintain market share.

Steps announced to improve India’s export performance may take some time to show results.

Schemes such as production-linked incentives could enhance India’s manufacturing capacities and drive exports over the medium term. Pant, however, believes that trade is unlikely to be an engine of India’s growth. “Rather, it could be it’s consequence,” he said.