India’s merchandise exports in the first half of FY25 rose at a modest rate of 1%, owing to slowdown in global demand, decline in oil prices, higher logistics costs for exporters, and of course, declining competitiveness in certain segments. The outlook for the second half is however of slight improvement, even as the current external situation is likely to sustain, according to analysts.
“Outlook for the rest of the year is mixed, and challenges remain in the form of disturbances in the Middle East,” said Ajay Sahai, director general, Federation of Indian Export Organisation (FIEO). “We expect goods and services exports to be around $825 billion, with goods exports at $450-$455 billion.” In FY24, good exports were $437 billion, down 3% on year.
In H1FY25, India’s overall goods exports stood at $213.2 billion as against $211.1 billion in the year ago period. As per FIEO’s estimate, the growth in H2 would be around 4-6%.
Elara Securities Economist Garima Kapoor, however, doesn’t expect the trend to “reverse materially” in H2FY25 as oil prices remain soft and global supply chain pressures have started to mount. “The disruption in the Middle East and the impact on the movement of trade through the Red Sea has impacted key shipping routes,” she said.
In the first six months of the current fiscal, said, Ashwani Kumar, president, FIEO, the ongoing global trade disruptions along with the volatility in crude and metal prices played a key role in bringing down the “value of exports to some extent”.
Petroleum products exports, accounting for 17% of total exports, declined 12.4% on year largely due to fall in global crude oil prices. Brent crude prices are currently trading around 11% lower than last year.
Gems and jewellery exports during H1 contracted by 10.9%, iron ore by 27.6%, and several agriculture products–such as cereals, cashew, oil meals, oil seeds–by about 9%. On the contrary, pick up in exports of electronic goods (19.7%), chemicals (4.6%), and engineering goods (5.3%) lead to an arrest in exports’ fall.
On the impact on manufacturing, economists say weak exports may pull down output growth to some extent, and subsequently the GDP. “The sectors like textiles, auto and petroleum products are particularly vulnerable,” said Suman Chowdhury, chief economist, Acuite Ratings and Research.
“The manufacturing sector growth in the Apr-Aug’24 period has slowed down to 3.6% but it may improve to some extent in H2 with an expectation of an uptick in domestic demand,” he said. Most economists expect India’s GDP growth in FY25 to be in the range of 6.8-6.9%.
From: financialexpress
Financial News
