Engineering Exports to the US, and China Fall in May, and Shipments to New Trade Pact Partners UAE and Australia Jump

· Crucial to Deepen Cooperation with African and Latin American Countries to Diversify Engineering Exports: EEPC India Chairman

Engineering goods exports to key markets such as the US and China continued a declining trend in May 2023 while shipments to two of India's newest trade agreement partners, the UAE and Australia, increased during this period.

The decline in exports to the US was primarily driven by a sharp drop in domestic demand, accompanied by fears of an impending recession.

Engineering exports to the US in May 2023 stood at US$ 1.44 billion, down 19.6% compared to US$ 1.79 billion in May 2022.

Cumulatively, engineering exports to the US declined 22.3% year-on-year in April-May of FY24 compared to US$ 2.84 billion.

Engineering exports to another key market. China continued to witness a sharp decline during the month under review. Shipments to China dropped 10.5% year-on-year to US$ 193.1 million in May. Cumulatively, the decline was to the extent of 13% year-on-year in the April-May period of the current financial year.

On the other hand, engineering exports to the UAE and Australia increased in May 2023. While engineering exports to the UAE rose nearly 32% year-on-year to US$ 567.1 million in May 2023, shipments to another new trade agreement partner Australia increased 17.4% during this period.

On a cumulative basis, shipments to both UAE and Australia witnessed positive growth.

Engineering exports to the European Union (EU) declined by 6.4% year-on-year to US$ 1.91 billion in May 2023.

Region-wise, positive year-on-year growth was noted majorly in WANA, CIS, and Oceania. Regions witnessing a drop in exports during May 2023 include North America, ASEAN countries, EU countries, Sub-Saharan Africa, and South Asia.

"Following the pattern of overall merchandise exports, the decline in engineering exports has persisted. In May 2023, there was a year-on-year decline of approximately 4.2% in India's engineering exports. Even in cumulative terms, the export performance during the first two months of the current fiscal year remained subdued, with a decline of 5.7%. The traditional engineering destinations for India, such as the US and European countries, have been the major contributors to this downfall," said EEPC India Chairman Mr. Arun Kumar Garodia.

He further noted that the decline in exports to the US was primarily driven by a sharp drop in domestic demand, accompanied by fears of an impending recession.

"Europe continues to grapple with the crisis stemming from the Russia-Ukraine conflict. Furthermore, neighboring South Asian economies like Bangladesh and Sri Lanka have imported significantly less from India compared to the previous year, primarily due to energy and debt crises. However, it is noteworthy that there has been a positive export trend in North East Asia after a prolonged period of decline," said Mr. Garodia.

Engineering exports from India continued to decline for the second straight month in fiscal 2023-24, but the decline was slower at 4.16% year-on-year in May as against 7.26% in April. During May 2023, engineering exports dropped to US$ 9.30 billion in May 2023 from US$ 9.71 billion in May 2022.

Cumulative engineering exports declined by 5.71% to US$ 18.28 billion during April-May 2023-24 from US$ 19.39 billion during the same period last fiscal.

Steel continued to be the main spoilsport behind the decline in engineering exports. In fact, exports of base metals as a whole declined except copper. Substantial drop-in shipment to North America, and the EU was also attributed to the decline in overall engineering exports.

Excluding the export of iron and steel, engineering exports recorded 2.31% year-on-year growth in May 2023 and only a marginal 0.41% decline during April-May 2023.

According to the Quick Estimates of the Department of Commerce, Government of India, the share of engineering exports in India’s total merchandise exports during April-May 2023-24 was 26.24%.

As many as 16 out of 34 engineering panels witnessed positive year-on-year growth in May 2023, while the remaining 18 panels witnessed negative growth in exports. Major engineering products like Iron and Steel, Products of Iron and Steel, most non-ferrous products including Aluminium, Zinc, Lead, and Tin products barring Copper and Nickel products, Industrial machinery and parts, Motor Vehicles, Two & Three wheelers, Auto Tyres, Railway Transport, and Hand tools witnessed a decline in exports during May 2023 vis-à-vis May 2022.

On cumulative terms, 16 out of 34 engineering panels recorded positive growth during April-May 2023-24 over the same period last fiscal. Engineering panels that witnessed growth in exports include copper and products, pumps and valves, machine tools, electrical machinery and equipment, auto components/ parts, medical devices and instruments, other construction machinery, etc. A major decline was witnessed in 18 engineering panels including the Iron & steel segment, Aluminium, Zinc, Nickel, and Lead from the Non-ferrous segment, Machinery for Diary, Motor Vehicles and Two-three wheelers, Railway Transport, Bicycle parts, and Project goods, etc.

"The Government of India has set a target of achieving US$ 300 billion in engineering exports by 2030. To attain this milestone, constant support from the government in terms of export facilitation is essential. While we appreciate the government's introduction of the mechanism for trade in INR (Indian Rupee), there is a need for greater clarity regarding the associated rules and regulations," EEPC India Chairman said.

He added, "It is also crucial to deepen cooperation with African and Latin American countries to diversify our exports. To this end, we require additional assistance from Indian missions in these countries."