India’s slowing exports

#GS-03 External Sector

Decline in India’s Export:

India’s exports declined about 7% in October compared with the same month last year.
This is the first time a decline for any month was reported since February 2021.
Engineering goods, which generally provides a good chunk of India’s goods exports in recent years, slid 21%.
Steel and allied products exports saw a decline of $2 billion in October.

The global slowdown is believed to be driven by a confluence of high inflation, rising borrowing costs and geopolitical tensions.
The slowdown in steel exports can be because the government levies an export duty on these products to help increase local availability which was later removed.
Another reason can be that in the month of Diwali every year, workers tend to take leave, thus impacting output.

According to com, Vietnam recorded a 4.5% growth in exports from a year earlier to $29.18 billion
Exports by the Philippines grew 20% in October.

For the week ended December 2, foreign exchange reserves stood at about $561 billion.
If we take October imports at $56.7 billion which was an eight-month low, as a benchmark, India has roughly about 9-10 months’ worth of import cover.
This is not as healthy as the 14-to-15-month cover that we had seen during the pandemic.
However, it is to be noted that this isn’t as bad as 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.
And if anything, forex reserves have been rising in recent weeks signalling hope for the future.