India fails to make substantial export gains in the US and Europe in FY24

NEW DELHI : India’s exports to its largest markets, Europe and the US, remained flat as its global shipments declined in FY24 on account of falling demand and gepolitical flare-ups.

While India’s overall exports dropped by about 2.4% annually in value terms during FY24, its exports to the US declined by 1%, and those to Europe rose by only 1.47%, according to official data from the commerce ministry.

The staples of Indian exports — gems and jewellery, ready-made garments, chemicals, cotton yarn and handloom products – declined to Europe (including the UK). But engineering goods, petroleum products, drugs and pharmaceuticals and electronic goods exports saw a rise.

India’s exports to Europe have been steadily rising since FY21, in tandem with the global economy emerging from the pandemic.

India’s exports to Europe, in value terms, stood at $55.32 billion in FY21. It rose to $85.20 billion in FY22, $97.45 billion in FY23, and $98.88 billion in FY24.

While geopolitical tensions have led to higher energy prices and transportation costs, resulting in cost pressures for exporters, tighter monetary conditions in advanced economies have led to a decline in demand, further hurting exports.

Military confontrations in the Red Sea region, a major trade route to Europe, have also hurt exports.

Meanwhile, India’s exports to the US, its second-largest export market after Europe, fell to $77.52 billion in FY24 from $78.31 billion in FY23. India’s exports to the US stood at $75.60 billion in FY22 and $51.63 billion in FY21.

In the US exports of gems and jewellery, engineering goods, ready-made garments, organic and inorganic chemicals, and marine products, among others, saw a decline, while drugs & Pharmaceutical and petroleum products saw a slight rise.

India’s trade performance in 2024 was influenced by global events like the Red Sea impasse leading to higher freight and disruption of supply chains, expensive crude oil on account of the continuing Russia-Ukraine war, the US-China trade tensions leading to more expensive value chains and the EU‘s proposed Carbon Tax and Forest regulations, economy think tank Global Trade Research Initiative (GTRI) said in a recent report on India’s trade.

“India should deal with each of these with a transactional approach. But as India’s share in world trade is just 2%, focus on enhancing sectoral competitiveness in labour-intensive sectors, diversification of services sectors and honest ease of doing business initiatives can surprise us with some good export performance,” it added.

During FY24, India’s merchandise exports stood at $437.06 billion, down from $451.07 billion during the previous fiscal. Goods imports fell to $677.24 billion from $715.97 billion recorded during the same period.

India’s service exports stood at $339.62 billion in FY24, up from $325.33 billion in the previous fiscal while imports fell to $177.56 billion from $182.05 billion in the same period.

The overall trade deficit, including merchandise and services, shrank to $78.12 billion in FY24 from $121.62 billion in FY23.

The silver lining is that the World Trade Organization expects global goods trade to recover gradually during 2024, following a downturn in 2023 due to high energy prices and inflation.

As economic pressures ease and incomes rise, the volume of global merchandise trade will increase by 2.6% in 2024 and 3.3% in 2025, the WTO said in its Global Trade Outlook and Statistics report earlier in April.

During 2023, global trade declined 1.2% amid geopolitical and economic turmoil, after registering a 3% growth in 2022

In value terms, the decline in merchandise exports was more pronounced in 2023, declining 5% to $24.01 trillion.

However, regional conflicts, geopolitical tensions and economic policy uncertainty pose substantial downside risks to the forecast, the WTO report added.