Why are Indian exports falling?


India’s exports contracted by 16.7% (year-on-year or year-on-year) in October. In other words, India exported almost 17% less in October this year compared to what it did in October 2021. To be precise, India exported goods worth of $29.78 billion in October compared to exports of $35.73 billion in October 2021. In the three months to October, Indian exports increased by 8.4% (July), 10.4% (August ) and 4.6% (September).

Generally speaking, the drop in exports in October reflects weaker global demand. Global economic growth is decelerating sharply in the wake of inflation still high in developed countries and, therefore, as sudden tightening of monetary policy (read higher interest rates) by almost all central banks. With a contraction in growth across the board – UK and US are on the verge of a recession while the eurozone is likely to stagnate even as China struggles to grow – demand for Indian products has plummeted. This is why exports contracted.

“Oil export growth fell to -11.4% year-on-year from 43.0% in September, partly reflecting lower global crude oil prices, while non-oil exports fell -16, 9% year-over-year, with declines broad-based across iron ore, handicrafts, textiles, some agricultural products, plastics, gems and jewelry, engineered products, chemicals, pharmaceuticals and leather goods” , says Nomura.

Source: CEIC and Nomura Global Economics

The graph above, from Nomura Research, shows the performance of different types of exports. As can be seen, manufacturing exports experienced the largest decline.

Going forward, Indian export weakness is likely to persist as global growth is expected to remain weak. Lower exports, in turn, will have a dampening effect on India’s gross domestic product (GDP) growth.

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