India, a silver lining in global trade

India Infoline News Service | Mumbai | September 21, 201609:09 IST

India continues to be one of the bright spots in the global Export-Import (EXIM) of containerized trade. As per International Monetary Fund (IMF), the country remains the fastest growing economy in the world.

Global trade growth has been tepid for over five years now and the trend is expected to continue in 2016.

Growth in the volume of global trade in 2016 is estimated at 2.8% largely unchanged from what it was in 2015.

India continues to be one of the bright spots in the global Export-Import (EXIM) of containerized trade.

As per International Monetary Fund (IMF), the country remains the fastest growing economy in the world.

 
WTO World Trade Outlook Indicator, 2016


According to Maersk Line, Indian containerized foreign trade volumes registered a growth of 11% in the first half of 2016. This increase is significantly higher than the 6% registered last year during the same period of time. In contrast with what occurred in 2015, growth in volumes has been balanced across exports and imports, the first have seen a growth at 11% year on year (YoY) and the second have remained strong at 12%. This growth clearly indicates that the initiatives taken by India to boost the economy are on the right track since containerized trade accounts for approximately 55% of the country’s total EXIM trade volumes.
 
“Although 2016 did not start on a positive note in terms of global trade for the world, the Indian market has grown consistently in the first half. This is primarily due to a relatively strong US economy and a slight improvement in the European market. Traditionally, Europe and North America have been India’s largest trading partners and account for over a third of the containerized trade, so when they do well India benefits,” says Franck Dedenis, Managing Director – India, Sri Lanka & Bangladesh Cluster, Maersk Line.
 
Export features
India’s top export partners during the first half of 2016 have been USA, UK, Germany, Saudi Arab, Turkey and Kenya. The top export commodity by growth volumes has been Vegetables at 56%, followed by Fruit & Nuts at 42%. Within Fruits, grapes witnessed the strongest growth at 180%. “Regardless the great local harvest this season, India has benefited from both a short season in South Africa and a shift in focus of South American grape exporters to the US market for better price realization. It has also helped that Indian exporters adopted international certifications like The Thompson and Global GAP, one of the key requirements for exporting grapes to European markets,” explains Franck Dedenis.
 
Along with fruits and vegetables, Maersk Line highlights the performance of the auto sector. The demand for all kinds of Indian vehicles including spare parts also remained positive at 9%, in spite of the dip in demand from Nigeria, one of the largest two wheeler export markets for India. This dip was due to ongoing fluctuation in the Nigerian Naira vs the US Dollar and a currency crunch in the local economy, as a result of the low global oil prices. Nevertheless, it must be noted that Algeria and Tunisia witnessed an increase in demand and that Egypt, Turkey and a few South American markets remain major countries for export.


 
Demand for Indian Garments remained strong as always across North America and Europe, registering a 13% volume growth.
 
Volumes for guar gum, a fast moving commodity to North America, have halved since their peak and continued to fall significantly due to low production and prices of crude oil. Guar gum is widely used in drilling of oil and gas wells to increase the production rate. It also offers other benefits such as fluid & water loss control, lubrication & cooling of drill bits, shale inhibitor and solids carrier.
 
Import features
India’s top import partners during the first-half of 2016 have been China, USA, Germany, South Korea and Saudi Arabia. Led by electronics, China remains the largest market for imports at over 30%, followed by North America that has been growing consistently and has been performing better than Europe due to price competitiveness.
 
Demand for consumer durables imports from Asia saw significant growth. This was followed by fruit and nuts, which registered a growth of 87% due to items like cashews coming to India from Africa and apples from North America and China among others.
 
Due to the increasing recycling industry, paper and plastic waste product imports also grew substantially. India is steadily augmenting the imports of these to process them, recreate new products and export them back to mature markets.
 
Metal scrap imports saw a fall in the first half of 2016, as a result of taxes introduced to protect the local industry and reduced construction activity.


Outlook for H2 2016
Trade wise the so called mature markets are currently performing better than new markets. This trend is well reflected in the containerized volumes and is expected to continue over the next two quarters. Maersk Line expects that sectors such as pharmaceuticals will see strong demand driven by Europe, North America and Africa where the consumption of generics is increasingly being propagated.
 
Central America has emerged as a strong export destination and will continue to see strong demand for commodities such as automobiles, yarn and steel coils among others.
 
As far as imports are concerned, countries such as Vietnam and Indonesia are becoming alternate origin markets, as consumer durables companies move some manufacturing out of China.
 
“Going forward, we expect Indian growth to be driven by the emergence of new destination markets, a strong US demand and a recovery in Europe. Taking all these factors into consideration, we can expect Indian trade to clock 8-9% growth for the full year 2016, which will be four times the growth of global trade”, explains Franck Dedenis.
 
He further adds, “As a matter of fact, India is implementing several ease of doing business initiatives and is investing in infrastructure development, to improve its global competitiveness and drive sustained economic growth. This will also help to realise the vision of Sagarmala and Make in India programmes.” According to Maersk Line, countries like India are a silver lining in a slow global economy and can be counted upon to assist the growth of global trade.

 

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