All traditional exports to the United States were in the red in October, as the 50% additional tariffs continued to bite India for the second consecutive month. It is only telecom instruments—largely mobile phones—that kept overall exports to the US from going into deep contraction, as per data released by the commerce ministry on Saturday.
Overall merchandise exports to the US fell 8.59% on-year to $6.30 billion. The data showed that all labour-intensive sectors reported a sharp decline in exports to the biggest market. The trend is a repeat of the September performance, the first full month when the full force of additional tariffs was felt. The 50% duties became effective from August 27.
Exempt vs. Affected Sectors
Telecom instruments, mostly comprising smartphones, saw an increase of 204.3% on-year to $1.50 billion. The biggest export sector to the US — engineering goods – saw a decline of 14.5% on-year to $1.39 billion in October. In April-October engineering sector exports to the US were up 4.7% to $11.43 billion as orders were pushed early to beat the tariff deadline.
The reason for the telecom sector’s performance is that it is exempt both from reciprocal and penal tariffs that together add up to 50% on most exports to the US. Another reason is that multiple tariffs on China made sourcing from India more cost effective, of which a big driver was Apple. In April-October, exports of telecom instruments expanded 190% on-year to $10.99 billion.
Readymade garments saw a contraction of 20.23% on-year to $307 million. However, because of the front loading of orders in the early part of the fiscal, decline in exports of readymade garments was less than 1%.
Marine product exports to the US were down 22.52% to $200 million, while exports of gold and other precious metal jewellery were down 51.22% to $214 million. Exports of pearls and precious and semi-precious stones were down 77% to $146 million.
Drugs and pharma exports, though exempt from extra duties, saw a decline of 7.52% to $729 million. Spices, handloom, leather footwear, carpets, handicrafts and rice exports were also down in October when compared to last year.
The few growth sectors included petroleum products, whose exports were up 94.48% to $251 million, computer hardware and electrical machinery.
Industry Awaits Trade Deal and Policy Support
The two-month performance makes it important that India and the US reach some kind of a deal that can take the burden of tariffs off from Indian exports. Other than the deal, the industry is now awaiting for early implementation of the Export Promotion Mission (EPM) and other export measures announced earlier this month to absorb the impact of the tariffs. “Exporters are eagerly anticipating its implementation. Additionally, the allocation of Rs 20,000 crore for credit guarantee is also expected to boost the morale of the engineering industry,” chairman of Engineering Export Promotion Council (EEPC) Pankaj Chadha said.
Despite the troubles of the past two months, India’s exports to the US are up 10.02% in April-October to $52.05 billion.
