Subdued Demand in China and New Covid Strain among Potential Threats to Global Trade: EEPC India Chairman

Engineering goods exports from India crossed US$ 8 billion for the third time in the last four months. Even as most product segments saw strong demand, aircraft and spacecraft parts were among the two panels that dipped marginally in June 2021.

While engineering goods exports from India to most key nations recorded high double-digit growth in June, 2021 mirroring global trade recovery, shipments to China, Singapore and Malaysia fell sharply during this period.

Exports to China, world’s largest buyer of raw material, in value terms declined 33% to US$ 501.9 million in June, 2021 from US$ 747.1 million in the same month last year. On a cumulative basis also, exports to China fell 15.4% in April-June period of FY22 to US$ 1357.9 million from US$ 1604.9 million in the corresponding period last financial year.

As per trade data analysis by EEPC India, the US remained top importer of India's engineering goods followed by UAE. Among the 25 key markets which together account for about 78% of India’s total engineering goods exports, 21 countries recorded positive growth during June this year.

Impressive growth was seen in most product categories. Out of 33 engineering panels or product segments, 31 panels witnessed positive growth in exports during June 2021 vis-à-vis June 2020. Decline in exports experienced in two panels, zinc and products falling by 5.1% and aircraft and spacecraft parts dipping marginally (0.6%).

"Engineering goods sector has been one of the top performers in exports. It recorded 50% or higher year-on-year growth for the fourth straight month in June. During this period, engineering goods export was at its all-time high. This is quite heartening but there are several challenges the industry is facing. On the domestic front, there has been acute shortage of containers, high logistics cost and increasing price of key raw materials such as steel," said EEPC India Chairman Mr Mahesh Desai.

As regards external front, Mr Desai said that with domestic demand being subdued in East Asian manufacturing giants including Japan, China and Korea, the export volumes from these countries have also been increasing which may pose a threat to the Indian exporters.

The EEPC India Chairman remained upbeat about the positive growth in exports during the current financial year but said that falling demand in China and spread of a new and highly infectious Covid strain as possible threats to global trade.

But despite several potential headwinds, India's trade outlook for the current year has so far been positive.

The EEPC India Chairman said that the engineering goods sector contributes almost 25% of total merchandise exports from India and hence to achieve the US$ 400 billion target, India’s engineering exports need to rise to US$ 100 billion.

While appreciating the support for the sector in the tough times, Mr Desai urged the government to expedite the announcement of benefits under Remission of Duties and Taxes on Exported Products (RODTEP) scheme and the release of pending funds under the MEIS scheme.

"This will ensure steady flow of working capital especially for MSMEs and further boost exports," he said.

Continuing with the growth momentum, India’s engineering exports have led the overall recovery in external trade which has been key support to the economy and job creation. It posted 50% or higher year-on-year growth for the fourth straight month to June 2021 and crossed US$ 8 billion for the third time in the last four months. Engineering shipment in June 2021 was at its all-time monthly high of US$ 8,836.32 million as against US$ 5,831.78 million in June 2020, registering 51.52% growth.

Engineering goods export in June 2021 was also 40.82% higher in comparison to June 2019 when the economy was free of any adversity caused by the pandemic. Product groups such as iron and steel, industrial machinery, electrical machinery and automobiles (combination of two and three wheelers and motor vehicles and cars) led the growth during this period.

Cumulative engineering exports during April-June 2021-22 stood at US$ 24,704.31 million, which was 81.58% higher than the shipment of US$ 13,605.00 million during April-June 2020-21. In comparison to April-June 2019-20, cumulative engineering export during April-June 2021-22 was higher by nearly 25%.

The first quarter of 2021 witnessed significant growth globally although there were regional disparities.