As global exports slow down, India is also reporting lower shipments to Asian economies.
Merchandise exports continue to ease because of a cooling global economy and falling commodity prices. Exports declined 8.8% over a year earlier to $211.4 billion in the current fiscal year for the April–September period.
While shipments to North America, India’s largest export destination, declined 9% year-on-year, exports to Association of Southeast Asian Nations or Asean countries fell 15%, while they declined 18% and 26%, respectively, to north-east Asia and South Asia. Exports to the Gulf Cooperation Council, a bloc of six Arab countries, eased 5%.
The share of India’s exports to Asean countries, north-east and south Asia also eased, accompanied by a rise in the share of North America, the EU and the Gulf.
India’s share of exports to Asia is declining and needs to be stepped up, said Radhika Pandey, associate professor at the National Institute of Public Finance and Policy. Global growth is set to slow further, according to the International Monetary Fund. Despite facing headwinds, the Asia-Pacific region is set to remain a key driver of global growth in 2023 and 2024, Pandey said.
The ongoing slowdown also highlights the need to diversify Indian exports beyond the US and Europe, Arun Garodia, chairman of the Engineering Export Promotion Council, said. The two regions together made up over a third of all of India’s exports even in the current fiscal.
One of the reasons for the decline of exports to Asia is that India is not a part of several regional trade agreements in the region—an area where it needs to step up, Pandey said. At a time when Indian exports continue to face headwinds from slowing global growth, more free trade agreements are the best way to boost growth, Garodia said.
Even in cases where India has signed FTAs, the rise in imports to partners has been greater than the rise in exports, according to a research note by Rahul Nath Choudhury, trade economist at EY. India’s FTA utilisation remains low, highlighting the country’s failure to take advantage of the benefits made available through its bilateral and multilateral trade agreements, he said.
This is because of inadequate stakeholder consultation, along with the government’s lack of comprehensive efforts to popularise FTAs among industry stakeholders after their implementation, Choudhary said.
India, however, has recognised the flaws in its existing FTAs and has initiated their review, he said. After recent trade agreements, including the Comprehensive Economic Partnership Agreement with the United Arab Emirates and the Economic Cooperation and Trade Agreement with Australia, India’s exports to both countries have shown a significant increase, he said.
