SBI Ecowrap - India's merchandise exports going strong: Sustaining the momentum is key

A deep dive into the 8-digit HS level exports shows that 80 products accounted for half of the exports value in Q1 FY21- 22

Sep 14, 2021 07:09 IST India Infoline News Service

India’s merchandise exports in August 2021 were USD 33.14 billion, an increase of 45.17% over USD 22.83 billion in August 2020 and an increase of 27.5% over USD 25.99 billion in August 2019. In April-August 2021 the exports were USD 163.67 billion, an increase of 66.92% over USD 98.05 billion in April-August 2020 and an increase of 22.93% over USD 133.14 billion in April-August 2019. India has set a target of $400 billion in merchandise exports for the current fiscal year ending in March 2022, compared to $291.2 billion in the previous fiscal year. Thus, till Aug’21, 41% of the target has been achieved.

A deep dive into the 8-digit HS level exports shows that 80 products accounted for half of the exports value in Q1 FY21- 22. Individually, Diamond exports have the largest share at 6% followed by diesel fuel at 5%. If we sort these 80 items into broad categories, they belong to Petroleum and Energy, Gems and Jewellery, Agri, Fishery, Meat and Allied, Chemicals and Pharma, Metals and products and Transport Equipment including Auto, Ships, Rail and Airplanes. At 2-digit HS category these products span across 32 2-digit classifications. The classifications undergo revision and an accurate comparison at 8 digit level is not possible.

However, if we go back to Q1 FY 2012-13, and aggregate the number of products with 50% share there are only 20 HS-2 categories. Thus, diversification has taken place over the years. Chemicals and Pharma, Metal Products, Textiles, Machinery, Plastics and Rubber and their articles and furniture are grabbing more share in the exports. However, this is only a quarterly comparison and the yearly figures will show the complete picture. If we look at the yearly compositional shift, then over the last 25 years, the top 20 HS-2 categories have accounted for around 74%-80% of the total exports.

Certain agri based products like residues and wastes from food industries, animal fodder, coffee, tea, mate and spices and labour intensive products like carpets and footwear have exited the top commodity export list. Meanwhile, certain components like Aluminum and articles thereof and Ships, Boats and Floating structures exports have grown rapidly and are now part of the top exports. There are certain other products which started with a very low base but have shown rapid growth like furniture, parts of aircraft and space craft and zinc and at 8-digit level are now part of the top 50% exports.

But the core exports base has remained static with Gems and Jewellery and petroleum products being the most prominent components. Both have an inherent volatility and this subjects India’s overall exports to overall volatility. By increasing the share of machinery among the Engineering Products, Electronics, Drugs and Pharmaceuticals, India can offset this volatility to an extent. However, it has to be kept in mind that the primary engine of growth for India remains consumption and unless that improves it is difficult for India to achieve higher growth on a sustained basis. For Q1FY22, in the overall GDP growth, the % share of the weighted contribution of exports was 40% while that of final consumption expenditure was 49%. However, the share of net exports was at a negative 18%, as imports had also jumped in Q1FY22.

The author of this article is Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India.

The views and opinions expressed are not of IIFL Securities,

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