More trouble for Indian exports: Europe business sentiment at 6-year low; to hit demand

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September 27, 2019 5:39 PM

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. 

weak sentiment, industry sentiment in EU, europe, eurozone, india's second largest trade partnerFor many sectors like textiles, the Eurozone is the largest market for India.

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.

Also Read: India’s textile exports tumble as Bangladesh, Vietnam get preferred access in EU

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.

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