INDIA'S EXPORTS 

1. Context 

2. Export sector performance

• Engineering goods have lent a strong shoulder to India's goods exports in recent years, which slid 21 per cent.
•  The slowdown to high inflation in developed regions, falling demand in China, a slowdown in the EU and the U.S. and the Russia-Ukraine War.
• The Commerce Ministry pointed out that for October, a decline of $ 2 billion worth of exports was seen in steel and allied products, highlighting the fact that the government had levied an export duty on these products to help increase local availability and hence temper local prices.
• The government has since removed this duty.
• The Ministry also highlighted that in the month of Diwali every year, workers tend to take leave, thus impacting output.
• Therefore, one should wait and see whether the export decline was only a blip or whether it was a trend that would stay.

3. Other exporting nations

• Vietnam, an export-dominated country, recorded a 45 per cent growth in exports from a year earlier to $ 29.18 billion amid "sustained foreign demand".
• Similarly, exports by the Philippines grew 20 per cent in October.

4. Domestic demand

• The monthly Finance Ministry review for October acknowledges a slowing export scenario but emphasises that domestic demand will carry through.
• The report states that the global slowdown is driven by a confluence of stubbornly high inflation, rising borrowing costs and geopolitical tensions, but cites local demand as being 'resilient'.
• It also expects a re-invigorated investment cycle which will spur growth and job creation in the coming days.

• In the monthly report, the Ministry also pinned hope on the fact that the last month saw the lowest sign-on this year for the employment guarantee scheme MGNREGS.
• It is hoped that a spike in tractor sales in September and October reflects improved sentiment.
• One seemingly positive signal for the economy is the private sector capital expenditure is on track to touch six lakh crore this fiscal which would make it the highest of the past six years.
• Private Capex typically depends on credit or loans from the banking system, which has seen healthy growth in the recent past, touching a high of 18 per cent last month.
• There have been reports of banks scrambling to gather deposits with videos of managers and their teams walking the streets announcing deposit rates to help mobilise funds for credit growth.
• Whether this credit growth is due to inflation and the low base effect from last year, remains to be seen over the coming months.

5. Foreign reserves

• For the week ended December 2, foreign exchange reserves stood at about $561 billion.
• If we take October imports at $56.7 billion (an eight-month low) as a benchmark, then we have roughly about 9-10 months' worth of import cover which is not as healthy as the 14 to 15-month cover that we had seen during the pandemic.
• The economists feel this is not as bad as in 2013 when foreign investors began pulling out of India's financial markets.
• At that time, we had less than seven months' worth of import cover.
• If anything, forex reserves have been rising in recent weeks signalling hope for the future.

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