Slow growth in the partner region eventually affects the demand from the exporting country and hence Europe, being India’s second-largest export destination after Asia, may make Indian exporters face the headwinds.
A sharp decline in production expectations, fewer new orders, and the stocks of finished products have dragged the industrial sentiment of the Eurozone to a six-year low, raising the possibility of a decline in India’s exports demand in the region. Meanwhile, the business climate indicator in the Eurozone has also plunged to a six-year low and the fall in industrial sentiment has pushed the overall economic sentiment to a five-year low in September 2019. Slow growth in the partner region eventually affects the demand from the exporting country and hence Europe, being India’s second-largest export destination after Asia, may make Indian exporters face the headwinds.
For many sectors like textiles, the Eurozone is the largest market for India. “Europe is the second-largest destination for India’s exports and thus any negative sentiment in the EU economy may have an adverse effect on India’s trade. Sentiments in the trade partner countries play a major role in demand,” Madan Sabnavis, Chief Economist, Care Ratings, told Financial Express Online. However, on the positive side, India’s exports to the EU contain many non-traditional goods like medicines, which will be comparatively lesser affected in case of any downturn, he added.
India’s economy is already going through a phase of slowdown, guided by the fall in domestic demand and investment, coupled with the disturbances from the global headwinds. While the US-China trade war was expected to give a room to Indian manufacturers to push their products to fill the gap, the trade war has also spread a cloud of uncertainties, which reduced the demand globally. Many countries’ economic growth suffered from the slowing business and trade, where India specifically registered its economy growth at a six-year low of 5 per cent in the first quarter of the current fiscal year.