India’s foreign trade has faced a downturn amid global challenges, with exports declining by 22% year-on-year to $33 billion in June. The weakening global growth and lower commodity prices contributed to this decline, impacting several major merchandise exports across different regions.
Notably, only nine out of the top 30 major merchandise exports experienced growth in June compared to the previous year, with electronic goods being among the few that saw an increase.
During April and May, six out of India’s top 10 export destinations experienced a decline, while one remained flat. However, amidst the falling trade, there were some surprising exceptions. Exports to Saudi Arabia, the United Kingdom, and the Netherlands showed positive trends. In particular, exports to Saudi Arabia surged by 28% annually, reaching $1.9 billion in April and May. This remarkable growth pushed Saudi Arabia to become India’s sixth-largest export destination, a significant jump from its 15th position a year earlier.
Similarly, exports to the United Kingdom rose by 15.6% to $2.2 billion, and exports to the Netherlands increased by 7.6% to $3.3 billion during the same period.
Petroleum products were the top Indian exports to Saudi Arabia, the United Kingdom, also comprised telecom equipment, readymade garments, electric machinery, and equipment. Largest exports to Netherlands were petroleum products and telecom instruments.
However, exports to the United States, United Arab Emirates, China, Bangladesh, Singapore, and Germany declined, while Italy, on the other hand, were flat.
The 10 export destinations made up for around half of India’s total merchandise exports, with the U.S. accounting for about 18%.
The declining trade has significantly impacted the micro, small, and medium enterprises (MSME) sector, which contributes nearly 40% to India’s total exports.
The impact of the export slowdown has been definitely felt by the SMEs, said Manguirish Pai Raicker, Chairperson of National Council for MSME of the Associated Chambers of Commerce and Industry of India.
It has impacted not just the ones that directly export, but also the thousands of vendors to larger exporting companies, Raicker said.
To tackle this situation, Indian exporters are exploring diversification and seeking opportunities in the Middle East, Africa, and other parts of the world. The government’s specific initiatives and free trade agreements have helped some SMEs find export opportunities. Around 60,000 more SMEs have registered for import-export code numbers in the past year, indicating a potential rise in exports.
Raicker believes that While trade agreements with the UK, Australia, and the UAE have benefitted exporters in certain sectors, there is still much potential for growth, particularly in cross-border e-commerce exports. Simplifying the ease of exporting remains a priority, and early orders for the festive season in the Western markets could provide a seasonal boost to India’s exports.