Good news on foreign trade front: Exports of 17 out of 30 major sectors decline in May

- Global figures indicate continued weakness in performance on the export front

- Smartphone performance is good while labor oriented apparel and textiles picture is poor

In May of the current year, the export of goods of the country has decreased to 34.98 billion dollars. In May last year, the figure of goods export was 39 billion dollars. On one hand, the government is bringing schemes like Product Linked Incentives to increase exports from the country, on the other hand, the struggle on the export front can be a matter of concern. Imports also fell to $57.10 billion in May and the trade deficit widened to a five-month high of $22.12 billion. According to the received statistics, out of total 30 major sectors, 17 sectors have seen an annual decrease in exports. Sectors that have seen a decline in exports mainly include petroleum products, gems and jewelery and engineering goods, while exports of electronics, including smartphones, have seen encouraging growth.

A significant decline has been seen in exports of apparel and textiles, which are labour-oriented and contribute heavily to employment in the country. The country's apparel and textile exports fell by 12.20 percent year-on-year in May as a result of weak demand from major hubs like the US, UK and Germany. Export demand is believed to remain sluggish as a result of high inflation and rising inventories. According to the statistics of the Ministry of Commerce, there has been an annual decrease in textile exports by 11.80 percent, while in apparel exports by 12.70 percent.

Smartphones worth Rs 1,200 crore were exported from the country in May. Out of this, the export figure of iPhone was Rs 10,000 crore. In the last financial year, India exported iPhones worth five billion dollars. In the first two months of the current financial year i.e. April-May, the export figure of iPhone has been more than Rs 20,000 crore. Exports from here are increasing due to diversification of supply chain and strategy of shifting from China to India by smartphone manufacturing companies. Due to India's announcement of Production Linked Incentive Scheme, the country is witnessing an increase in the production of smartphones, industry sources are also saying. It is also being claimed that global companies are shifting their supply chain here due to increase in exports from India.

In terms of value, India's textile and apparel exports were $281.60 million in May, which was $320.60 million in May 2022. Decline in textile and apparel exports is a matter of concern as these sectors not only provide large employment in the country but also contribute to the overall export growth of the country. Industry sources are saying that exports are being affected as a result of gluts and high inflation in America, UK and Germany. Thus, India is currently facing a situation like the situation on the export front.

The current account deficit is expected to remain contained to manageable levels as commodity prices have come down and India is seeing meaningful recovery in the services sector. The country's current account deficit is expected to remain below two percent of GDP in the current financial year. But this does not mean that the decline in goods exports should be taken lightly. With few exceptions in terms of exports of goods India's position is still not so favorable that India can be proud of it. India, which was counted as a domestic consumer of goods produced at home, has started to change, but China's parity is still not seen. China's GDP per capita is five times that of India and its manufacturing sector is ten times larger than India's. Chinese goods have been very competitive globally in terms of price due to huge production volumes coupled with cheap labour. In addition, China has built up excess capacity for exports.

Global figures received indicate that performance on the export front is still weak. According to the estimates of the Organization for Economic Cooperation and Development, the global economic growth rate which was 3.30 percent in 2022 has been reduced to 2.70 percent in 2023. The economic growth rate of America is also expected to decrease. The US Federal Reserve kept interest rates steady at its last meeting, but also hinted at two rate hikes in the coming months. This increase will see interest rates in the US at a two-decade high. Apart from this, the European Central Bank has also talked about increasing the interest rate till inflation is not controlled. The Bank of England has also continued to raise interest rates. Thus, higher interest rate conditions at India's major export hubs may impact demand.

There were reports that India has deployed its own diplomatic missions and investment promotion agencies in 40 countries where 85 percent of India's total exports come from. To control its current account deficit, the government is adopting a dual strategy of exploring import alternatives and increasing exports. However, how sustainable this strategy is in the current global business environment remains to be seen. To overcome the challenges facing the export of goods, it is necessary to increase the export of most sectors to create overall development and employment of the country.