India has, for the first time, met the government's annual export target since 2014. The country crossed the crucial threshold of $400-billion annual merchandise export target.
“India set an ambitious goods export target of $400 billion and achieved it for the first time. I congratulate our farmers, weavers, MSMEs, manufacturers and exporters for this success," Prime Minister Narendra Modi tweeted.
Pointing out the target was achieved nine days ahead of schedule, Modi tweeted that this translated to $33 billion worth of exports every month, $1 billion of exports every day, and $ 46 million worth of exports every hour of the year.
The Commerce Department is expected to release further details later in the day, but available data shows that cumulative exports had grown by 45.8 percent in April-February FY22 (2021-22) as compared to the same period of FY20 (2019-20). Total exports stood at $374 billion till February, up from $256.5 billion in 2019-20. Only the last two months had seen an economic downturn, owing to COVID.
After a difficult FY21, marked by lockdowns and restrictions, exports had started rising at the end of the financial year. In the current financial year, they have risen every month till February. All major categories of exports have risen consistently. Moneycontrol takes a deep dive into India's export sector to see what went right.
Oil prices heating up
A global super-cycle kept commodity prices high across the board throughout 2021 and contributed massively to the $400-billion target being reached. Ironically, this came even as the Commerce Department has been aggressively trying to reduce the share of commodities in the overall export basket.
The Bloomberg Commodity Spot Index, which covers a broad basket of globally traded raw materials, has risen more than 45.6 percent over the past one year, and has shot past a high not seen since 2011.
The impact of rising commodity prices on India's exports is evident for India's single largest export item (processed petroleum), which alone has a 15 percent share in the country’s overall exports.
Processed petroleum exports doubled in the first 10 months of FY22 to $50.2 billion, up from $25.3 billion in FY21. This was due to the continuously rising price of crude oil, pushed up by uncertainties in the post-COVID world, demand spiking for oil, and, finally, the Russian invasion of Ukraine. Beginning the year at $64.8 per barrel, the price of Brent crude has now almost doubled to $115 per barrel.
Glittering Gems
Gems and jewellery, the second-largest export category for India, also saw a major rise in earnings. Overall, exports in this sector rose to an unprecedented $32 billion, representing almost 10 percent of India's exports.
Diamond exports rose to $20.7 billion in the first 10 months of FY22, up from $17 billion in FY21. Meanwhile, the export of jewellery -mainly studded with gold - rose to $9.2 billion, up from $6.5 billion a year ago.
In 2020, total global exports of the gems and jewellery industry amounted to $693 billion. With a share of 3.5 percent, India ranked 7th on the list. The Indian government has made this sector a focus area and set an ambitious target to double its share to 7 percent of global exports soon.
Industrial inputs fetch more
In the aftermath of COVID-19, a rise in the prices of key input materials, such as steel, chemicals and plastics, has helped India's exports recover.
Higher demand for steel, not only in developing markets but also in the developed world -- from Europe to the US -- meant that Indian exporters earned total foreign exchange worth $19.2 billion from iron and steel exports in the first 10 months of FY22, up from $12.1 billion in FY21.
“There has been a substantial jump in the export of primary steel in recent months while many value-added steel products shipped from the country have seen a 15-35 percent decline. We have, therefore, suggested the government to take non-tariff and tariff measures as part of the raw material export policy," said Engineering Exports Promotion Council India Chairman Mahesh Desai.
This came after prices of diverse products such as hot rolled steel coils, cement, and copper, rose by more than 30 percent in China, the largest consumer of metals and other construction products on earth.
The export of organic chemicals rose to $18 billion in April-January FY22, while plastic exports shot up to $7.5 billion and rubber exports to $3.7 billion.
According to global data and market intelligence provider IHS Markit, the spiraling inflation that began in early 2021 mainly due to a build-up of global supply chain issues due to the coronavirus pandemic and a lack of global freight containers, has not subsided. Instead, prices have continued to build on those levels as industries in many nations started firing up and widespread input shortages became evident subsequently.
Agri exports
India’s agriculture and allied exports have grown at a brisk 24 percent in the first 10 months of the current financial year. Exports were boosted by an increased access to markets in the US, European Union and the United Arab Emirates, and targeted efforts by the government to expand the global reach of processed food from India.
Commerce ministry data shows that exports of farm produce, both processed and unprocessed, climbed to $38.6 billion in April-January 2021-22, up from $31.16 billion. The government expects total exports from the sector to rise to $43 billion by March 2022. Data showed that while the global commodity supercycle played a part in raising the prices of non-food products, such as tea, cotton, and rubber, prices of food products have remained stable.
The growth in the export of farm produces was led by a sharp rise in the exports of non-basmati rice, cereals such as rice and wheat, dairy items and sugar, all of which grew by at least 40 percent in April-January 2021-22, according to the Agricultural and Processed Food Products Export Development Authority (APEDA), which tracks non-plantation crops.
Export of spices like ginger, pepper, cinnamon, cardamom, turmeric and saffron, which have therapeutic qualities, has also grown substantially. Meanwhile, the Marine Products Export Development Authority (MPEDA) said that shrimp and prawn exports have already reached 88 percent of the total export value of last year.
A range of new products has also been shipped abroad for the first time in FY22. They include fresh vegetables and mangoes from Varanasi, black rice from Chandauli, oranges from Nagpur, bananas from Theni, bhoot jolokia chilli from Nagaland, red rice from Assam and millet from Himachal Pradesh, among others. The government has also significantly pushed exports of processed items such as honey, cocoa, fruit jams, and wine, in which India hasn’t shared global expertise till now.
India has now become the ninth-largest honey exporter in the world, shipping out 7.36 lakh tonnes in the previous financial year. The US is the largest buyer, at 80 percent.
Export basket diversifying
Policymakers have marked FY22 as the year when exports of high-value, finished goods took hold significantly. Since coming to power, the government has pushed labour-intensive manufacturing to simultaneously boost productivity, job creation and export.
After six years of trying to substitute industrial raw materials and agri-items with products that are higher up the value chain, India saw an increasingly diversified export basket.
Engineering items constituted the second-largest category in exports till October. According to the Engineering Exports Promotion Council, this was sustained by tapping into a broader network of market beyond Europe and North America. Finding cheaper sources of copper ore beyond Indonesia and Chile also helped keep primary prices low for both domestic items and export products.
Electronics exports also continued to maintain pace, registering $16.1 billion in FY22 (April-January). Pushed up by the performance-linked incentive scheme of the government, electronics exports have now crossed their earlier high of $15 billion in 2019-20, before the pandemic. Exports of mobile phones and components stood at $3.8 billion, similar to pre-pandemic levels.
Meanwhile, heavy machinery equipment stood at $20.5 billion and is expected to end the year above pre-pandemic levels.
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