India’s exports dip by 3.5% to $32.62 billion; WTO Predicts Slower World Trade Figures.

India’s exports have fallen a tad due to the global headwinds blowing strongly and have caught India’s exports; it contracted by 3.52 per cent to $32.62 billion in September against $33.81 billion in the same months last year.
According to the data released by the Commerce Ministry, the trade deficit has widened to $26.72 billion.
Recession fears in developed countries are akin to a storm brewing in a cup for the markets and the economy, and the fear of recession has resulted in lower demand for Indian goods.

India’s some of the biggest export markets – China, the United States and the European Union are all reeling from an economic slowdown leading to weak demands for Indian Products. In order to combat the rising inflation, many of these countries have put export restrictions on some commodities, resulting in the slowdown of goods exports.

The decline in the value of exports has been driven mainly by a fall in steel, cotton yarns, and plastic prices, barring gems and jewellery.
We are not in a hard place when discussing India’s exports. However, there are headwinds that need to be looked out for related to what and how things pan out for developed economies.

Engineering exports which form one of the largest exports in India, contributing towards the value of total goods exported from India, show the sharpest decline in August, having fallen 14.59% YoY to $8.25 billion.
Outbound shipments saw a decline to a 13-months low of $33 billion in August; last year, it stood at $33.38 billion.

Exports fell 9 per cent from $36.27 billion in July on a sequential basis but grew 17.1 per cent YoY during April-August to $192 billion on a cumulative basis.

Moderation in demand related to the textile industry has been noticed. However, India may be able to make up for the same due to the challenging situation in Bangladesh and Sri Lanka, two countries that are India’s biggest competitors in this space.

In August, India exported apparel worth $1.32 billion, down 0.42 per cent YoY. On a cumulative basis (April-August), outbound shipments saw a growth of 18 per cent. Exports of raw materials – cloth/fabrics and cotton yarns, are lowered by almost a third to $881.86 million in August over the year-ago period.

What is in store?
According to Ajay Sahay, director-general (DG) and chief executive officer (CEO) of the Federation of Indian Export Organisations (FIEO) – the trend at the moment seems to be receiving orders of products that are low in value due to high inflation. It is possible that in the future, some impact on the value of these products may be seen. However, the volume of exports should be stable, and a steady volume will positively affect employment and job creation.

What has worked in India’s Favour?
While there is an overall decline in exports, what has worked to India’s advantage is the signing of the India – UAE Comprehensive Economic Partnership Agreement, whereby total exports to UAE have been on an upswing. Also keeping this trend is the exports of plain gold to Middle Eastern Markets, which increased by 29 per cent in July.

Also, India is looking forward to a free–trade agreement with the United Kingdom and India – Australia Economic Cooperation and Trade Agreement, which is an advantage for India concerning stability in the total number of export figures.

What is expected in the word trade going forward?
World economic markets and trade are witnessing a sharper than expected and a broad-based slowdown, with inflation peeking than seen in several decades. As the cost of living is growing and with the tightening financial conditions in most countries, it contributes to lesser and more cautious trade exports and imports.

The global forecast has slowed from 6.0 per cent in 2021 to 3.2 per cent in 2022 and is expected to further slow down to 2.7% in 2023.
Here are growth projections of different countries released by the International Monetary Fund IMF,

What is World Trade Organization, WTO saying?
According to a report published by WTO, world Trade is expected to slow down and lose its momentum in the second half of 2022. In 2023 it is likely to be on the lower side due to multiple shocks that are weighing the world economy down.

• WTO economists predict global merchandise trade volumes will grow by 3.5% in 2022, which is slightly better than the 3.0% forecast in April. However, for 2023, it is anticipated that it may increase by 1.0%, steeply low from the earlier estimate of 3.4%.
• World merchandise trade volumes are forecasted to grow by 3.5% in 2022. They may slow down to 1.0% in 2023 (revised down from 3.4%).
• World GDP – market exchange rates will rise by 2.8% in 2022 and by 2.3% in 2023   (revised down from 3.2%).
• Trade and output will be pressed down by several related shocks, including the war in Ukraine, high energy prices, inflation, and monetary tightening.
• For the CIS region, The Merchandise exports fell by 10.4% quarter-on-quarter in Q2, while imports plunged 21.7%.
• The Middle East is expected to have the most robust trade volume growth of all regions in 2022, both on the export side (14.6%) and on the import (11.1%).
• The total value of merchandise trade in U.S. dollars went up by 17% year-on-year in the second quarter of 2022.
•  Energy prices increased sharply by 78% year-on-year in August, while food prices were up 11%, grain prices were up 15%, and fertilizer prices were up 60%.

Oil, Energy and Gas
Natural gas prices have differed strongly across regions, with European prices up 350% year-on-year for August. While the same month, the prices in the U.S. were up 120%. However, these prices were below the European levels (US$ 8.80 per million Btu compared to US$ 70.00 in Europe). European demand for liquified natural gas (LNG) to make up for the decreased supplies from the Russian Federation has further pushed up energy costs in Asia.

The prices in Asia thus for LNG were up 87% in August. Although there is a slight decrease in European gas prices, falling 34% between 31 August and 23 September. However, by historical standards, these prices are high.

Thankfully, Oil prices have gone down from fresh peaks, although this drop possibly indicates a weaker global demand and is not to be taken as increased productivity when it comes to the supply side.

Conclusion: The economic trade – exports and imports are indicative of slower demand in developed nations that are struggling with increased costs of living. Further tightening of liquidity in the markets has had a slow and steady impact on the trade figures of developing nations.

Therefore, India’s exports, too, are witnessing a slowdown from their previous figures, although the lowered percentage is not a point of worry yet.
However, as there are predictions of further worsening of global conditions in the coming few months, the outlook for FY23 is profoundly concerning.

It has already started to show and spread its tentacles across all industries that are revising their strategies to outdo the economic downturn and consolidate and survive if the recession prediction may come true.

India, too, has taken steps to not have a great recession impact on its economy by signing trade agreements with various regions and countries. This step should help consolidate India’s trade and manage its exports and imports in a more productive manner.

For now, the headwinds are strong and will probably grow stronger as the world struggles with an economic slowdown much worse than what it witnessed during 2001 and even during the Covid -19 pandemic years coupled with the Russian – Ukrainian conflict that has brought the whole world down to its knees.

edited and proofread by nikita sharma