Analysis of Indian engineering exports during November 2015: December 16, 2015

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2 Analysis of Indian engineering exports during 2015: December 16, 2015 Trend in overall trade India's merchandise exports registered a decline for the twelfth consecutive month falling as much as per cent in dollar terms to US$20.01 billion in 2015 from US$ billion during, Cumulative value of exports for the period was US$ billion as against US$ billion registering a negative growth of per cent in Dollar terms over the same period last year. India s total merchandised imports during also fell by per cent on account of a persistent fall in global prices to US$29.79 billion, over the level of imports valued at US$ billion in, Cumulative value of imports for the period was US$ billion as against US$ billion registering a negative growth of per cent in Dollar terms over the same period last year. The trade deficit for was estimated at US$ billion which was lower than the deficit of US$ billion during, Engineering exports India s engineering exports which accounts for over 22.81percent of India s total exports in 2015 fell by 29 percent to US$ million from US$ million during The engineering export figures post first quarter of the new fiscal , was marginally positive during July 2015, but the fall in exports in the rest of the five months has been over 25 percent respectively excluding the month of October. Consequently, the cumulative value of engineering exports during recorded a dip by over 14.4 percent to US$ billion from US$ billion the same period last year. The monthly and cumulative engineering figures for vis-à-vis are depicted below: 1 Trend in overall trade EEPC India

3 Table1: Engineering Exports Months () April May June Quarter July August September Quarter October (Source: Department of Commerce, Government of India) World Exports How has the world exports trend been in the current annual year vis-à-vis 2014? Table 2 shows the decline that has been witnessed in the first nine months of Table 2: World Exports 2015 Vs 2014 (Values in USD Million) Months () January February March April May June July August September January- September Source: WTO Figure 1 below depicts the monthly trend in engineering exports for both 2014 and World Exports EEPC India

4 Figure1: Trends in Monthly Engineering Exports US$ Billion Monthly Engineering Exports for vis-a-vis Value in US$ billion () () (Source: EEPC India analysis) The contribution of engineering sector in overall manufacturing production is quite substantial and trend of engineering production therefore, is somewhat contained in the trend of manufacturing production in India. Some correlation between manufacturing production growth and merchandise export growth is found as manufacturing sector contributes significantly to India s engineering production as well as to exports. Hence, a broad analysis of industrial production, especially of manufacturing is effective in the context of engineering export analysis as manufacturing has over 75 weightage in India s industrial production. India s engineering export growth declined in Oct 2015 but the pace of decline was much lower than those of the previous two months indicating improvement in exports. Similarly, India s industrial production growth in Oct 2015 came at several years high at 9.8 as against 3.8 in Sep 2015 and 6.3 in Aug 2015 as per the latest govt. data. Industrial growth in September 2015 was revised upward to 3.8. Manufacturing growth, in line with the improvement in engineering exports, hit double digit at 10.6 during October 2015 after several years as against a feeble 2.9 in September 2015 and 6.7 in August Overall IIP Index, the standard measure for industrial output, stood at in October 2015 as against an upwardly revised in September 2015 and in August Cumulative industrial growth during October 2015 accelerated to 4.8 from a far lower 2.2 during the same period last fiscal. 3 World Exports EEPC India

5 The growth rates in Engineering Exports and the in Manufacturing in the country in the current fiscal in Table 1A below: Table 3: Engineering Exports vis-a-vis Manufacturing ( ) Months/ Year Engg. Exports () Manufacturing () April May June Quarter July August September Quarter October N A (Source: Department of Commerce and CSO) Analysis of the export and manufacturing data for the ongoing fiscal also established some correlation between the two. India s engineering exports conceded bigger decline during May 2015 in comparison to the previous month while manufacturing growth also decelerated. The fall in export growth decreased in June and manufacturing growth also strengthened. Exports registered marginal growth during July 2015 but growth of manufacturing production decelerated. Then export growth and growth of manufacturing sector moved in opposite direction in August and September In August, the export recorded a massive decline but manufacturing growth was recorded at three-year high probably due to festive season in India while in September, decline in exports was lower but manufacturing growth slowed down. However, both moved in the same direction in October While decline in engineering exports decelerated, manufacturing growth reached its several years high. We also present the month wise corresponding revised engineering exports for as opposed to Table 4: Revised Engineering Exports ( ) USD Million Quarter Month Rate in Percent Quarter 1 April * 26.02* May * 24.77* 4 World Exports EEPC India

6 Quarter Month Rate in Percent June * 23.06* Quarter 2 July * 22.95* August * 21.20* September * 21.32* Quarter 3 October * -9.81* * 31.36* December Quarter 4 January February March Total Exports * 14.81* Impact of Exchange Rate (*Revised figures as per latest estimates by DGCI&S) How has the exchange rate been in 2015 vis-a-vis 2014? We look at the average exchange rate for 2015 vis-a-vis The below table provides the same: Table 5: Average Exchange Rate Average Exchange Rate 1 USD to INR (Source: Calculated from RBI archive) The official exchange rate of rupee vis-à-vis the US Dollar during 2015 has depreciated by 7 to that of the same period last year. We begin by looking at the Engineering Panel wise exports for the month of 2015 vis-a vis 2014 and cumulative exports for visa vis The data is given in Table 4 below: Table 6: Trends in Engineering panel Exports 2015 and Impact of Exchange Rate EEPC India

7 Sl no. Panel er 2014 Novem ber, 2015 April, er, Iron and Steel and Products made of Iron and Steel April, Novem ber, 2015 Growt h A Iron and Steel B Products of Iron and Steel Sub Total Non-Ferrous Metals and Products made of Non-Ferrous Metals A Copper and products B Aluminium and products C Zinc and products D Nickel and products E Lead and products F Tin and products G Other Non Ferrous Metals Sub Total A Industrial Machinery like Boilers, parts, etc B IC Engines and Parts C Pumps of all types D Air condition and Refrigerators E Industrial Machinery for dairy, food processing, textiles etc F Machine Tools G Machinery for Injecting moulding, valves and ATMs Sub Total Electrical Machinery Auto and Auto Components A Motor Vehicle/cars B Two and Three Wheelers C Auto Components/Part Sub Total Aircrafts and Spacecraft parts and products Ships Boats and Floating products and parts Miscellaneous Items A Medical and Scientific instruments Impact of Exchange Rate EEPC India

8 Sl no. Panel er 2014 Novem ber, 2015 April, er, 2014 April, Novem ber, 2015 Growt h B Railway Transport C Hand Tools & Cutting Tools D Electrodes Accumulators E Accumulator and Batteries F Bicycle & Parts G Cranes Lifts & Winches H Office Equipments I Other Construction Machinery J Prime Mica & Mica Products K OTHER MISC. ITEMS Sub Total Grand Total (Source: Department of Commerce, Government of India) Some factors that need to be noted are: Out of 33 engineering panels, 26 panels (79 percent) of the engineering panels recorded a negative growth and remaining 7 panels fared positive growth in the month of India s Primary Iron and Steel exports have fallen by more than 28 per cent in 2015 vis-à-vis 2014, which is slightly less than the cumulative fall during 2015 vis-à-vis Products of Iron and Steel have also dropped by more than 40 percent in 2015 vis-à-vis 2014, which is more than the cumulative fall during 2015 vis-à-vis Unlike in the month of 2015, when Ship, boats and floating bodies showed massive recovery in exports, it again registered a drastic fall in growth rate by almost 73 percent in 2015 over All non ferrous metals and products barring Tin and products made of tin witnessed deterioration in exports during 2015 over The highest decline is seen in the exports of Nickel and products falling by more than 58 percent during 2015 over 2014, 7 Impact of Exchange Rate EEPC India

9 followed by Copper and Zinc falling by percent and percent respectively during Among the Industrial Machinery panel, products like IC engines, Pumps and valves, Air condition repair machinery, industrial machinery for dairy and machinery for ATMs witnessed decline in growth rates during 2015 against The Industrial Machinery panel as a whole declined by 8.5 percent during the said period. Other panels like Boilers, Machine tools, Electrical machinery, Cranes Lifts & Winches, Office Equipments, and other miscellaneous products registered positive growth in 2015 vis-à-vis Top 25 destinations for Indian Engineering Exports in Absolute Value (even though the growth rate may be negative) We now look at the export scenario of top 25 nations that have highest demand for Indian engineering products during 2015 over 2014 in Absolute Value, even though the growth rate may be negative. Country wise cumulative figures for April 2015 has also been taken into concern to see the trend of India s engineering exports in the current fiscal. Table 7: Engineering Exports Country wise ( ) Country, 2014, 2015 April U S A UAE SRI LANKA U K SINGAPORE CHINA GERMANY MEXICO MALAYSIA ITALY SOUTH AFRICA BANGLADESH SAUDI ARAB Impact of Exchange Rate EEPC India

10 Country, 2014, 2015 April KOREA RP TURKEY JAPAN NEPAL FRANCE NIGERIA NETHERLAND THAILAND INDONESIA IRAN SPAIN BELGIUM Total of top Total Engineering Exports Share of Top 25 in Total () Note: Red font indicates negative monthly and cumulative growth (Source: Department of Commerce, Government of India) The country wise figures for 2015 show interesting trends. These are: Out of the top 25 countries, 20 countries recorded negative growth in the month of Only 5 countries recorded positive growth in the month of 2015 which is deterioration in comparison with October2015. Indonesia recorded the highest growth in exports by 34.3 in 2015 compared to 2014, even though it registered fall in cumulative growth. Among the European export destinations for the Indian engineering exports France and Netherlands registered positive growth for both monthly and cumulatively during 2015 as well as April Like before Indian engineering exports to USA, continued to be the highest in the reporting month, even though it recorded negative growth both in 2015 as well as April Out of 221 destinations for export of Indian engineering goods, the top 25 nations accounts for 72.9 percent of the total during The growth rate in the top 25 countries during , taken together recorded fall in exports by 14.1 per cent which is less than the fall in India s total engineering exports by 14.4 per cent. 9 Impact of Exchange Rate EEPC India

11 Regional Distribution of Engineering Exports We now look at the Regional Distribution of Engineering Exports for as opposed to We also look at the trend in 2015 vis-à-vis The Table below gives this picture: Region, 2014 Table 8: Region Wise Exports Trend, 2015 April EU North America ASEAN Others AFRICA South Asia North East Asia West Asia LAC Grand Total (Source: Department of Commerce, Government of India) Note: *Figures have been rounded off. Source: DGCI&S; **Myanmar has been included in ASEAN+2 and not in South Asia, since ASEAN is a formal economic grouping. Figure 2: India s region wise exports during EEPC India

12 North East Asia 9 South Asia 10 EU 18 North America 16 ASEAN+2 13 West Asia 7 AFRICA 11 LAC 5 Others 11 (Source: EEPC India analysis) Note: Others also includes rest of Europe and CIS Engineering exports to EU ranks first in region wise exports, irrespective of negative growth faced cumulatively for the current fiscal of Unlike in the month of 2015, where engineering exports to EU regained slightly by 8.8 per cent during 2015 in comparison to 2014, it again drastically fell in 2015 viz-a-viz North America ranks second registering negative growth both during the cumulative period of over as well as during 2015 vis-à-vis Exports to Africa recorded significant drop during 2015 vis-à-vis Exports to LAC recorded considerable negative growth during 2015 vis-à-vis We now analyze the performance of some of the important products during We pick the major panels and seek the heavy growth and heavy declines in these panels IN THE CURRENT FISCAL of to give an idea about the trend that is about to emerge. Export partners Novem ber_14 Table 9: Export of Iron & Steel Apr_ er_15 e r Apr_ SUBSTANTIAL CUMULATIVE GROWTH COUNTRIES 11 Regional Distribution of Engineering Exports EEPC India

13 Export partners Novem ber_14 er_15 Apr_ e r Apr_ Export to World BELGIUM CHINA KUWAIT DJIBOUTI SOMALIA BAHARAIN IS MADAGASCAR SENEGAL HEAVY CUMULATIVE DECLINE COUNTRIES U S A IRAN NEPAL ITALY UAE KOREA RP BANGLADESH INDONESIA (Source: Department of Commerce, Government of India) USA tops the list importing 9.2 of India s total export of Iron and Steel during Iran drops to second position importing 6.9 of India s total export of Iron and Steel respectively during the same period respectively. 12 Regional Distribution of Engineering Exports EEPC India

14 Export partners Table 10: Export of products Iron & Steel _14 Apr Apr_ SUBSTANTIAL CUMULATIVE GROWTH COUNTRIES Export to World IRAQ NETHERLAND MEXICO SPAIN PERU SINGAPORE BANGLADESH SWEDEN HEAVY CUMULATIVE DECLINE COUNTRIES U S A UAE GERMANY U K SAUDI ARAB ITALY CANADA FRANCE (Source: Department of Commerce, Government of India) USA tops the list importing more than 20 of India s total export of Products of Iron and Steel during While UAE and Germany imports 8.1 and 5.9 of India s total export of Products of Iron and Steel respectively during the same period. Export partners Table 11: Export of Industrial Machinery _ 14 _ 15 Apr- er Apr- er SUBSTANTIAL CUMULATIVE GROWTH COUNTRIES Export to Regional Distribution of Engineering Exports EEPC India

15 Export partners World _ 14 _ 15 Apr- er Apr- er GERMANY UAE SAUDI ARAB BANGLADESH FRANCE VIETNAM SRI LANKA KENYA HEAVY CUMULATIVE DECLINE COUNTRIES U S A U K TURKEY CHINA ITALY NIGERIA INDONESIA THAILAND (Source: Department of Commerce, Government of India) USA tops here importing 16.3 of India s total exports for Industrial Machinery during Germany and UK imports 4.9 and 4.6 of India s total exports for Industrial Machinery during Table 12: Export of Automobiles 14 Regional Distribution of Engineering Exports EEPC India

16 Export partners _14 _15 Apr SUBSTANTIAL CUMULATIVE GROWTH COUNTRIES Apr Export to World MEXICO SRI LANKA ITALY VIETNAM SPAIN EGYPT CHILE PHILIPPINES HEAVY CUMULATIVE DECLINE COUNTRIES SOUTH AFRICA U K UAE BANGLADESH SAUDI ARAB ALGERIA NIGERIA NETHERLAND (Source: Department of Commerce, Government of India) In case of Motor vehicles Mexico assumes the top position replacing South Africa, importing 12.3 of India s total exports of Motor vehicles during South Africa and Sri Lanka holds the 2 nd and 3 rd position respectively importing 10.5 and 9.2 of India s total exports of Motor vehicles during the same period. 15 Regional Distribution of Engineering Exports EEPC India

17 Export partners _1 4 Table 13: Export of Non-Ferrous metals _15 Growt h e r e r Growt h SUBSTANTIAL CUMULATIVE GROWTH COUNTRIES Export to World MALAYSIA KOREA RP U S A TAIWAN SAUDI ARAB NEPAL INDONESIA THAILAND HEAVY CUMULATIVE DECLINE COUNTRIES CHINA UAE SINGAPORE MEXICO U K GERMANY TURKEY NETHERLAN D (Source: Department of Commerce and CSO) China is the topmost importer for Non ferrous Metals importing 17.5 of India s total export of Non Ferrous Metals during Malaysia and Korea Republic retains their positions importing 11.7 and 10.7 respectively during Table 14: Export of Electrical Machinery and Components 16 Regional Distribution of Engineering Exports EEPC India

18 Export partners Export to World _1 4 e r _15 Growt h e r SUBSTANTIAL CUMULATIVE GROWTH COUNTRIES e r Growt h U S A GERMANY SINGAPORE CHINA JAPAN BANGLADES H ITALY VIETNAM SOC REP HEAVY CUMULATIVE DECLINE COUNTRIES U K U ARAB EMTS FRANCE SAUDI ARAB NIGERIA NEPAL OMAN MALAYSIA (Source: Department of Commerce and CSO) USA is the largest importer of Electrical Machinery and Equipments from India during with 14.2 share in India s global export of the product group. Germany retains the second position with 6.7 share. Exports to UK and UAE witnessed decline during over the same period last fiscal despite being the third and fourth largest export destination for Electrical Machineries. Table 15: Export of Aircrafts & Spacecrafts 17 Regional Distribution of Engineering Exports EEPC India

19 Export partners Export to World _ 14 _15 er SUBSTANTIAL CUMULATIVE GROWTH COUNTRIES er UAE CZECH REPUBLIC GERMANY ISRAEL NETHERLAND MALAYSIA CHINA CANADA HEAVY CUMULATIVE DECLINE COUNTRIES SRI LANKA U S A U K FRANCE RUSSIA SINGAPORE IRELAND SWITZERLAN D (Source: Department of Commerce and CSO) In case of Aircrafts and Parts, Sri Lanka replaces UAE to be the top export destination for India, importing 33.6 of India s total exports of Aircrafts and Parts during USA holds the third position importing 12.1 of India s Aircrafts & parts during Table 16: Export of Ships, Boats and Floating Structures and parts 18 Regional Distribution of Engineering Exports EEPC India

20 Export partners e r_14 _ er SUBSTANTIAL GROWTH COUNTRIES Export to World SINGAPORE JAPAN NORWAY BAHARAIN IS FRANCE ITALY EGYPT BANGLADESH HEAVY DECLINE COUNTRIES UAE MALAYSIA SOUTH AFRICA SRI LANKA QATAR ISRAEL KAZAKHSTAN INDONESIA (Source: Department of Commerce and CSO) Singapore, Japan and Norway remains as the top three export destination for India s export of Ships, Boats and Floating Structures and parts during 2015 sharing almost 61.3 of total export of this product group. UAE is the fourth largest importer of this group importing during Table 17: Export of Auto Components 19 Regional Distribution of Engineering Exports EEPC India

21 Export partners _14 er _15 e r e r SUBSTANTIAL GROWTH COUNTRIES Export to World MEXICO UAE JAPAN NEPAL SRI LANKA NIGERIA SPAIN COLOMBIA HEAVY DECLINE COUNTRIES U S A TURKEY THAILAND U K GERMANY BRAZIL ITALY BANGLADESH (Source: Department of Commerce and CSO) USA covering 22 share in India s global exports of Auto Components/parts, remains the topmost destination for India s exports witnessing negative growth both monthly and cumulatively during UAE holds the ninth position by recording a significant 56 year-on-year growth during Turkey and Thailand holds the second and third position importing 9.2 and 4.7 of Indian auto component/parts, during Conclusion The slump in India s overseas shipment continued in 2015 and this time, the decline in engineering exports hit its worst in this fiscal. The slackening of demand from overseas following the global economic slowdown took its toll on exports. The trend was the same across the globe and it became increasingly difficult for the SME exporters in the engineering sector to survive. The massive 29 fall in engineering exports during 20 Conclusion EEPC India

22 2015 was driven mainly by sectors like Ships Boats and Floating structures, Aircrafts and Spacecrafts, Nickel and products, Railway Transport, Copper and products and Products of Iron. Out of the top 25 countries, 20 countries recorded negative growth in the month of 2015 while only 5 recorded positive growth. The cumulative exports to all the regions during have also registered negative growth. Exports to all regions recorded negative growth during 2015 with EU and ASEAN+2 being the worst hit. Country wise, Indonesia and Bangladesh recorded highest growth in engineering imports from India during 2015 while Malaysia and Nepal conceded highest declines. Exports to USA and China dropped by 14.2 and 18.7 respectively during the month concerned. 21 Conclusion EEPC India