The government has stepped up efforts to ensure greater geographical diversification of India’s exports after top markets — the US and the EU — witness a sharp deceleration in economic growth. It has also started brainstorming sessions with industry to expand the country’s product basket to cater for a wider buyer base, official sources told FE.
Senior officials of the commerce ministry have started in-depth, product-wise analysis to identify export opportunities in markets beyond the traditional ones, sources told FE. “The ministry is closely reviewing exports with various export promotion councils and overseas missions,” said one of the officials. Given that the large markets are likely to see a demand slowdown even in the next fiscal, the diversification efforts assume significance.
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Interestingly, the fresh push comes at a time when the export pecking order has changed dramatically. The Netherlands has emerged as India’s third-largest export destination this fiscal, ahead of China and Bangladesh. But what comes as a greater surprise is that Brazil, which occupied the 21st spot in FY22, is now India’s 8th biggest export market. Similarly, Indonesia has moved up seven notches to grab the 7th position this fiscal.
Having hit a record $422 billion in FY22, India’s exports started faltering in recent months, thanks to the Ukraine war and the interest rate tightening by key central banks that will hit growth in advanced economies. Merchandise exports barely inched up in November from a year before and they had shrunk 16.7% in October. This has dragged down India’s export growth to just 11.1% in the first eight months of this fiscal, after a decent performance earlier this fiscal.
The International Monetary Fund has forecast only 0.5% growth for Europe and 1% for the US for 2023, against the projected expansion rates of 3.1% and 1.6%, respectively, for this year. The World Trade Organization (WTO) has estimated only 1% growth in global trade volume for 2023. This will weigh on the prospects for India’s export growth as well.
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Of course, while India’s exports to the Netherlands saw a spurt this fiscal, those to some other EU economies — such as Belgium, Greece, Ireland, Poland and Denmark — have started faltering. In fact, amid a demand slowdown, only two European nations — the Netherlands and the UK — are among India’s top ten markets, against 4 in FY22. Germany and Belgium, which featured in the list last fiscal, are out of it now.
Meanwhile, the US and the UAE continue to be the largest and second-largest export destinations, respectively, for India. The exports to the US rose 9% until October (still lower than the rise in overall goods exports) to $47.2 billion, while those to the UAE shot up 18.9% to $18.2 billion.
Interestingly, exports to Australia and Taiwan, who have been seeking to diversify away from a belligerent China, were as high as $8.06 billion and $2.7 billion, respectively, last fiscal–or 165.9% and 142.1% of the respective targets. These markets are expected to be tapped more aggressively by exporters. An interim trade deal with Australia, which will come into force on December 29, is expected to further spur exports.