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Exports to South Asia contract over 10% in August.
Oct 19, 2022

Exports to South Asian nations have faltered this fiscal as key markets of Bangladesh and Nepal have restricted purchases mainly to essential products in the wake of foreign exchange crises there. It has added to the woes of Indian exporters as they battle a demand slowdown in major economies like the US, EU and China.

Latest data showed exports to South Asia contracted 10.5% in August from a year before to $2.1 billion. Outbound shipments until August grew 10.7% to $11.9 billion, underperforming the growth in overall merchandise exports. India’s goods exports rose 10.6% in August to $36.9 billion and 19.5% in the first five months of this fiscal to $196.4 billion. These nations include Bangladesh, Nepal, Sri Lanka, Pakistan, Afghanistan, Bhutan and Maldives. Barring Pakistan, India has been a major supplier to rest of these countries.

Exports to Bangladesh shrank 22.7% in August to $0.89 billion and recorded only an 8.7% rise in the first five months of FY23 to $5.82 billion. Similarly, despatches to Nepal contracted 11.3% in August to $0.69 billion, which weighed down growth in supplies until August to just 3% to $3.65 billion.

While exports to Pakistan grew 35.9% until August to $304 million, they were primarily driven by a low base and remained way below the level witnessed before the 2019 Pulwama terror attacks that also hit bilateral trade relations.

Interestingly, India’s exports to crisis-ridden Sri Lanka still grew 39% until August this fiscal, primarily due to New Delhi’s credit line to the island nation for purchases of Indian goods.

New Delhi has extended assistance, including credit lines and currency swaps, worth nearly $4 billion to Colombo since January to bail out the island nation of its worst forex/economic crisis in about 70 years. While the forex problems of Bangladesh and Nepal are less severe in magnitude, they have reined in imports to conserve dollars, hurting India’s export prospects.

Given the expected slowdown in global trade, Indian exporters have been bracing for a rough sail particularly in the second half of this fiscal. From the International Monetary Fund (IMF) to the World Trade Organization (WTO), multilateral bodies have trimmed their global trade forecasts for 2022 and 2023 and even warned of a possible economic recession next year.

The IMF has pegged global trade growth at 4.3% for 2022, down from 10.1% in the previous year. Worse, it has forecast a meagre 2.5% growth rate for 2023. The WTO has put out more conservative estimates, as it warned of a 'darkened 2023'. It now expects merchandise trade volumes to grow 3.5% in 2022 and just 1% in 2023.

Subdued global trade growth will weigh on India’s exports and complicate the country’s efforts to replicate its FY22 stellar performance in this fiscal as well. India’s exports had hit a record $422 billion in FY22, far exceeding the previous best of $330 billion. Domestic exporters had cashed in on an industrial resurgence in advanced economies last fiscal, which has now lost momentum due to a slowdown in economic growth.

financialexpress.com

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