India’s engineering goods exports to key markets, including the US, Europe, and China, registered a year-on-year decline in December amid a global demand slowdown, as per a statement by Engineering Export Promotion Council (EEPC).
This assumes significance as the share of engineering exports in total merchandise exports from India is about 25%.
“India’s engineering goods exports to the US declined 7% in December, and shipments to China continued a downward trend. In the first nine months of FY23, engineering exports achieved 62.86% of the US$ 127 billion target set by the government for the entire fiscal,” EEPC said.
The value of shipments to the US, the top market for India’s engineering goods, declined 7.3% to $1.58 billion in December 2022 as compared to $ 1.71 billion in December 2021, the council said. Engineering exports to China continued to slide and registered a 47% year-on-year decline to $ 233.2 million in December 2022 as compared to $ 440.7 million in the same month of the previous year.
During the same period, engineering exports to the European Union (EU) fell 14.3% year-on-year to $ 1.54 billion.
Despite an FTA with the UAE, shipments to the UAE dipped 18.9% in December 2022 to $ 456.3 million as against $ 562.9 million in December 2021. Overall, Indian engineering exports reached the $ 9 billion mark for the first time after July 2022. However, the growth remained negative.
The pace of decline also accelerated to 11.89% year-on-year. An unfavorable base effect, i.e., a sudden rise in the shipment of engineering products from India in December 2021 made this decline look so high.
Engineering exports in December 2022 were recorded at US$ 9.08 billion as against US$ 10.30 billion in December 2021.
Cumulative engineering exports for April-December 2022-23 also conceded a 3.03 percent decline over the same period last fiscal as it dropped to US$ 79.83 billion from $82.32 billion in April-December 2021-22.
As many as 23 out of 34 engineering panels witnessed positive year-on-year growth in exports during December 2022 vis-a-vis the same month last fiscal. Engineering products like iron and steel and non-ferrous metals like copper, aluminum, lead, and tin, and other products like machine tools, two-three wheelers, bicycle parts, auto tyres, and hand tools witnessed a decline in exports during December 2022 vis-à-vis December 2021.
On a cumulative basis, 21 out of 34 engineering panels recorded positive growth during April-December 2022-23 over the same period last fiscal. The major decline was witnessed in the iron & steel segment, non-ferrous segment, two-three wheelers, bicycle parts, ships and boats, and project goods.
“The 15 percent export duty on steel continued to weigh on engineering exports. While exports of iron and steel declined by 53 percent in December 2022 year-on-year, the decline was around 43 percent on a cumulative basis. The recent withdrawal of the export duty on selected steel items is expected to restore the exports of Iron and Steel in the coming months,” the council said in a statement.
Excluding the export of iron and steel, engineering exports still recorded a 3.79% year-on-year decline in December 2022 but witnessed 7.8% growth on a cumulative basis during April-December 2022-23.
Other factors impacting India’s engineering export growth include an economic slowdown in some of India’s top export destinations, including China and the EU.
“Some of the recent reports suggest global trade would remain subdued in the first half of 2023. The S&P Global report has estimated that global trade may decline by 1.9 percent and 1.4 percent in the first and second quarters of 2023, respectively. However, the same report also indicates that global trade would recover in the later part of the year. Therefore, there is some positive news for India in the coming months,” said EEPC India Chairman Arun Kumar Garodia added.
“Till then there are certain factors about which India should be cautious – the protective duty structure in EU, withdrawal of EU GSP and EU’s Carbon Border Adjustment Mechanism are expected to have some transformational impact on India’s presence in global supply chains,” he added.
As India is negotiating an FTA with the EU, EEPC has highlighted these issues to the government.
As per the quick estimates of the Department of Commerce, Government of India, the share of engineering exports to total merchandise exports from India was 26.34 percent in December 2022 while for cumulative engineering exports during April-December 2022-23, the share was 23.98 percent.
During the first nine months of fiscal 2022-23, engineering exports achieved 62.86% of the $ 127 billion target set by the government for the entire fiscal year.