India’s merchandise trade deficit narrowed to a five-month low of $21 billion in September 2024, primarily driven by a surge in textile exports. This positive trend comes amidst a backdrop of geopolitical tensions, particularly in West Asia, which have disrupted global trade flows.
Textile Sector Shines
One of the key contributors to India’s export growth in September was the 17% year-on-year surge in textile exports. This uptick is attributed to a shift in garment orders from conflict-hit Bangladesh to India. The sector, which has faced challenges in recent years due to sluggish global demand, is now poised for a resurgence.
Engineering and Electronics Exports Gain Momentum
In addition to textiles, engineering and electronic goods exports also contributed to the overall improvement in India’s trade balance. Engineering goods exports to Russia and Europe, buoyed by increased military spending in these regions, witnessed a significant rise. Similarly, exports of electronic items like mobile phones to the US also gained traction.
Geopolitical Challenges and Trade Disruptions
The ongoing conflict in West Asia has had a significant impact on global trade, including India’s exports. The closure of the Red Sea shipping route has disrupted trade flows, leading to logistical challenges and increased costs. Moreover, the volatility in crude and metal prices has further added to the uncertainty in the global trade environment.
Government Initiatives and Industry Outlook
The Indian government is taking steps to mitigate the impact of these challenges. The Commerce Ministry is working closely with the Shipping Ministry to assess the situation in West Asia and increase India’s shipping capacity to minimise disruptions.
Industry experts, such as FIEO President Ashwani Kumar, have highlighted the need to address trade finance challenges faced by MSMEs to enhance their competitiveness in global markets. Additionally, the Federation of Indian Export Organisations (FIEO) has expressed concerns over declining petroleum exports, which could impact India’s overall export performance.
Positive Outlook for Engineering Goods
Despite the challenges, the outlook for India’s engineering goods sector remains positive. The sector has emerged as a key driver of overall exports, with segments like industrial machinery and auto components performing well. However, the metal sector is facing headwinds due to pricing issues and logistics costs.
As India navigates the complex geopolitical landscape and global economic uncertainties, the country’s export-oriented sectors, particularly textiles and engineering, will play a crucial role in maintaining economic growth and strengthening India’s position in the global market.
