Analysis of Indian engineering exports during March 2016: April 19, 2016

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2 Analysis of Indian engineering exports during 2016: April 19, 2016 Trend in overall trade India's merchandise exports continued to decline for the sixteenth straight month in This time the exports contracted 5.5 percent in to US$22.72 billion as against US$24.03 billion from a year earlier. The Indian exports continued to perform poorly mainly due to subdued global economic growth and stilldepressed commodity prices. Cumulative value of exports for the period April was US$ billion as against US$ billion registering a negative growth of per cent in Dollar terms over the same period last year. On the other hand, India s total merchandised imports during, 2016 were valued at US$ billion which was per cent lower in Dollar terms over the level of imports valued at US$ billion in, The country s cumulative value of imports for the period April 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 trade deficit narrowed to over a five year low of US$ 5.07 billion in 2016 as against US$ 11.4 billion in the same period of the previous fiscal. The drop in imports has been faster than the export slowdown narrowing down the trade deficit to US$ billion for April , lower than the US$ billion during April, Engineering exports India s engineering exports that accounted for nearly 23 of merchandise export in 2016 also shrank in tandem with the overall trend, falling at a higher rate than the contraction of the overall merchandised exports. India s engineering exports dropped by 11.2 percent to US$ 5.17 billion in 2016 from US$ 5.83 billion in However, the fall is a bit lower than the yearonyear fall in January 2016 and December 2015 by29 and 30 percent respectively. During the ongoing fiscal, India's engineering exports registered yearonyear growth by 1.4 only in the month of July 2015 while the decline was hovering around 2530 in the last four months till January 2016, which later improved for the two consecutive months of February and Cumulative engineering exports from India conceded percent fall during EEPC INDIA 1

3 April and failed to touch the US$ 60 billion mark even amidst such a global economic downturn. The Cumulative exports dropped to US$ billion during April from US$70.77 billion during the same period of the previous fiscal. The monthly and cumulative engineering figures for visàvis are depicted below: Table1: Engineering Exports () Months () April May June Quarter July August September Quarter October November December Quarter January 6, February Quarter April (Source: Department of Commerce, Government of India) World Exports How has the world exports trend been in the current annual year visàvis 2015? Table 2 shows the decline that has been witnessed in the first couple of months of the new calendar year of Table 2: World Exports 2016 Vs 2015 (Values in USD Million) Months () January February EEPC INDIA 2

4 Months () N.A. Total Source: WTO (till Feb 2016) Figure 1 below depicts the monthly trend in engineering exports for both 2014 and Figure1: Trends in Monthly Engineering Exports US$ Billion (Source: EEPC India analysis) Engineering sector is an important segment of the broader Manufacturing sector as the contribution of engineering production in overall manufacturing output is quite significant. Now, as production and exports are directly correlated, some correlation between manufacturing production growth and merchandise export growth is very likely to exist. Hence, a broad analysis of industrial production, especially of manufacturing sector is effective in the context of engineering export analysis as manufacturing has over 75 weightage in India s industrial production. The downfall in Indian engineering exports continued for the eighth straight month to 2016 but the pace of declined moderated to percent from around 30 during three EEPC INDIA 3

5 successive months to January In fact, moderation started from February In line with the moderation in decline in engineering exports, India s manufacturing production also came back to growth path in 2016, however feeble after decline in previous three months. November is the first month in to conceded a decline in yearonyear manufacturing production when engineering export suddenly dropped by around 30 percent. Decline in exports moderated slightly in December 2015 when decline in manufacturing also moderated. However, manufacturing output declined at a faster pace in January 2016 while engineering exports witnessed slightly slower decline. The month of February witnessed a substantial slowdown in the pace of yearonyear decline in engineering exports and manufacturing also came to growth path. Overall IIP Index, the standard measure for industrial output, stood at in February 2016 as against a revised a month ago and a lower in December Cumulatively, industrial production during AprilFebruary grew at 2.6 percent, which was a bit lower than the same period last year at 2.8. 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 visavis Manufacturing (201516) Months/ Year Engg. Exports () Manufacturing () April May June Quarter July August September Quarter October November December Quarter January February N A Quarter N A (Source: Department of Commerce and CSO) An analysis of the engineering export and manufacturing growth 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 EEPC INDIA 4

6 July 2015 but growth of manufacturing production decelerated. Then export growth and growth of manufacturing moved in opposite direction in August and September In August, the export recorded a massive decline but manufacturing growth was recorded at threeyear 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 during the last three months of Decline in engineering exports decelerated in October and manufacturing growth reached its several years high. November 2015 just saw the reverse. Engineering exports declined to its highest pace of the current fiscal while manufacturing production declined for the first time in Then in December 2015, fall in exports moderated slightly while the pace of decline in manufacturing also slowed down to nearly half the rate of the previous month. January 2016 however saw a slower rate of decline in engineering exports coupled with a bigger fall in manufacturing growth. The month of February reflected the link between these two when engineering export growth declined significantly and manufacturing bounced back to growth. We also present the month wise corresponding revised engineering exports for as opposed to Table 4: Revised Engineering Exports (201314) USD Million Quarter Month Rate in Percent Quarter 1 April * 26.02* May * 24.77* June * 23.06* Quarter 2 July * 22.95* August * 21.20* September * 21.32* Quarter 3 October * 9.81* November * 31.36* December * 21.32* Quarter 4 January * 9.55* February * 0.08* * 3.48 Total Exports * 14.84* (*Revised figures as per latest estimates by DGCI&S) EEPC INDIA 5

7 Impact of Exchange Rate How has the exchange rate been in 2016 visavis 2015? We look at the average exchange rate for 2016 visavis 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 visàvis the US Dollar during 2016 has depreciated by 6.3 percent to that of the same period last year. We begin by looking at the Engineering Panel wise exports for the month of 2016 visa vis 2015 and cumulative exports for April visa vis April The data is given in Table 4 below: Table 6: Trends in Engineering panel Exports 2016 and April Panel April, Sl no. 2015, 2016 percent 2014 April, Grow th perce nt Iron and Steel and Products made of Iron and Steel A Iron and Steel B Products of Iron and Steel Sub Total NonFerrous Metals and Products made of NonFerrous 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 Industrial Machinery EEPC INDIA 6

8 Sl no. Panel 2015, 2016 percent April, April, Grow th perce nt 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 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 EEPC INDIA 7

9 Sl no. Panel 2015, 2016 percent April, (Source: Department of Commerce, Government of India) April, Grow th perce nt 3 Some factors that need to be noted are: Out of 33 engineering panels, 20 panels (61 percent) of the engineering panels recorded a negative growth and remaining 13 panels fared positive growth in the month of India s Primary Iron and Steel exports have fallen by more than 41 percent in 2016 visàvis 2015,which is more than the cumulative fall of 37 percent during April visàvis April Products of Iron and Steel have also dropped by more than 16 percent in 2016 visàvis 2015, which is slightly better than the cumulative fall during April visàvis April unlike the previous month of February. Like in the month of February, Aircraft and Spacecraft have contracted for the second straight month in falling by 48 percent to that of the previous fiscal. On the contrary, Ship, boats and floating bodies registered a growth in exports by more than 17 percent in 2016 visàvis 2015, overcoming its sharp fall in the previous month of February There has been a drastic fall in the exports of Nickel and Zinc products falling by more than 91 percent and 71 percent respectively during 2016 over 2015 quite similar to the month of February. Infact 5 panels out of 7 non ferrous metals and products panels witnessed decline in exports during 2016 over In the Industrial Machinery panel, the only product in the group that registered significant export growth after Machine Tools is Nuclear reactors and boilers that have grown to the extent of 57 percent during 2016 against Sectors like Machine Tools that registered highest decline in February, expanded in the month of 2016 over that of 2015 by 19 percent. In the Industrial Machinery panel, 5 out of 7 panels witnessed negative growth in the month of 2016 visàvis same period last fiscal. The panels include IC Engines, Pumps and Valves of all types, Air Conditioning and Repair Machinery, Machine for ATMS and Industrial Machinery for dairy products, etc. Among all the panels, significant heavy growth is observed in the Railway Transport Equipments sector growing by 87 percent from US$11.73 million in 2015 to US$ million in But unlikely, the cumulative export growth for this panel perceived a drop in exports by 27 percent during April visàvis April EEPC INDIA 8

10 Other panels like Motor vehicles/cars, Auto Components and parts, Ships and Boats, Medical & scientific equipments, Railway and Transport equipments, Cranes Lifts & winches Office equipments, and other miscellaneous items, registered positive growth among the panels in 2016 visàvis 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 2016 over 2015 in Absolute Value, even though the growth rate may be negative. Country wise cumulative figures for April have also been taken into concern to see the trend of India s engineering exports in the current fiscal. Country Table 7: Engineering Exports Country wise ( ), 2015, 2016 percent April April percent U S A U ARAB EMTS SRI LANKA U K GERMANY CHINA P RP SINGAPORE MEXICO BANGLADESH ITALY NEPAL SAUDI ARAB TURKEY MALAYSIA KOREA RP SOUTH AFRICA JAPAN FRANCE NIGERIA NETHERLAND INDONESIA THAILAND EEPC INDIA 9

11 Country, 2015, 2016 percent April April percent SPAIN IRAN BELGIUM Total of top Share of top Note: Red font indicates negative monthly and cumulative growth (Source: Department of Commerce, Government of India) The country wise engineering export figures for 2016 show the following facts: During the month of 2016, 12 out of the top 25 countries recorded yearonyear growth in engineering imports from India while the rest 13 conceded decline over the same month last year. Indonesia was the nation to see highest growth in engineering imports from India at 76 percent during the final month of fiscal followed by Bangladesh at around 50 percent. However, cumulative results for entire fiscal showed decline in the same for Indonesia while Bangladesh enjoyed growth on a cumulative basis also. USA continued to be the top exporting destination for India's engineering products, even though it recorded negative growth both in 2016 as well as in entire fiscal Among the European nations UK, Germany Spain and Netherland achieved growth in engineering imports from India during 2016 while France, Belgium, Italy and turkey conceded decline in the same. On a cumulative basis, only Netherland managed to grow by 5.46 during fiscal Sri Lanka was with highest export growth in the last month but recoded just percent growth in march Japan was the country with highest cumulative growth for the last completed fiscal at percent while Iran recorded highest decline in shipment from India at 45.4 percent. Out of 223 exports destinations of Indian engineering goods, top 25 nations accounted for nearly 73 percent of India's total engineering exports during April Overall, India's engineering exports to its top 25 destinations also recorded a dip both monthly as well as cumulative basis. The decline in exports to top 25 EEPC INDIA 10

12 countries was higher at 17.6 percent then decline in total engineering exports during the same time period. Regional Distribution of Engineering Exports We now look at the Regional Distribution of Engineering Exports for April as opposed to April We also look at the trend in 2016 visàvis The Table below gives this picture: Region, 2015 Table 8: Region Wise Exports Trend, 2016 April April AFRICA ASEAN CIS E U LATIN AMERICA MIDDLE EAST AND WEST ASIA (MEWA) N AMERICA N E ASIA Other SOUTH ASIA 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. EEPC INDIA 11

13 Figure 2: India s region wise exports during April (Source: EEPC India analysis) EU is the region with highest shipment of engineering products from India at 18.5 during the last fiscal despite a decline in the same over the same period previous fiscal. North America ranks second registering negative growth both during the cumulative period of April over the previous fiscal and during Exports to CIS nations saw significant drop both on a monthly basis at percent and cumulatively at percent. Exports to South Asia recorded highest growth during 2016 over the same month last fiscal. All ten specified regions saw lower imports of Indian engineering products during the last fiscal (201516) over the previous fiscal. 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. EEPC INDIA 12

14 Table 9: Export of Iron & Steel Export partners Mar_15 Mar_16 AprMar SUBSTANTIAL CUMULATIVE GROWTH COUNTRIES Export to World CHINA KUWAIT GREECE DJIBOUTI BAHARAIN SOMALIA SENEGAL FINLAND HEAVY CUMULATIVE DECLINE COUNTRIES NEPAL ITALY U S A IRAN UAE BELGIUM SOUTH KOREA BANGLADESH (Source: Department of Commerce, Government of India) Nepal tops the list as importer of India s Iron and Steel during April with 8.63 percent share followed by Italy and USA importing 7.05 percent and 7 percent respectively during the same period. China only achieved a yearonyear growth in imports of India's iron & steel among the top ten importers. Table 10: Export of products Iron & Steel Export partners Mar_15 Mar_16 AprMar SUBSTANTIAL CUMULATIVE GROWTH COUNTRIES Export to World IRAQ NETHERLAND OMAN EEPC INDIA 13

15 Export partners Mar_15 Mar_16 AprMar SPAIN PERU MEXICO BANGLADESH CHILE HEAVY CUMULATIVE DECLINE COUNTRIES U S A UAE GERMANY SAUDI ARAB U K ITALY CANADA FRANCE (Source: Department of Commerce, Government of India) USA tops the list importing more than 20 percent of India s total export of Products of Iron and Steel during April While UAE and Germany imports 8.24 percent and 5.9 percent of India s total export of Products of Iron and Steel respectively during the same period. Table 11: Export of Industrial Machinery Export partners Mar_15 Mar_16 AprMar SUBSTANTIAL CUMULATIVE GROWTH COUNTRIES Export to World GERMANY UAE BANGLADESH SAUDI ARAB FRANCE SRI LANKA VIETNAM SOC REP KENYA HEAVY CUMULATIVE DECLINE COUNTRIES U S A U K EEPC INDIA 14

16 Export partners Mar_15 Mar_16 AprMar TURKEY CHINA ITALY NIGERIA INDONESIA THAILAND (Source: Department of Commerce, Government of India) USA once again tops the chart importing 15.7 percent of India s total exports for Industrial Machinery during April Germany and UK moves remain second and third position respectively importing 4.7 percent and 4.5 percent respectively of India s total exports for Industrial Machinery during April Table 12: Export of Automobiles Export partners Mar_15 Mar_16 Apr Mar SUBSTANTIAL CUMULATIVE GROWTH COUNTRIES Export to World MEXICO SRI LANKA ITALY NEPAL SAUDI ARAB EGYPT VIETNAM SOC REP SPAIN HEAVY CUMULATIVE DECLINE COUNTRIES SOUTH AFRICA NIGERIA U K BANGLADESH COLOMBIA EEPC INDIA 15

17 Export partners Mar_15 Mar_16 Apr Mar UAE PHILIPPINES PERU (Source: Department of Commerce, Government of India) (Note: Automobiles sector includes Motor vehicles and Two and Three Wheelers) In case of Automobiles Mexico assumes the top position importing 13.2 percent of India s total exports of Automobiles during April Sri Lanka and South Africa holds the 2 nd and 3 rd position respectively importing 8.4 percent and 7.3 percent of India s total exports of Automobiles during the same period. Table 13: Export of NonFerrous metals Export partners Mar_15 Mar_16 AprMar SUBSTANTIAL CUMULATIVE GROWTH COUNTRIES Export to World KOREA RP MALAYSIA U S A TAIWAN SAUDI ARAB NEPAL KENYA INDONESIA HEAVY CUMULATIVE DECLINE COUNTRIES CHINA UAE SINGAPORE MEXICO U K TURKEY GERMANY EEPC INDIA 16

18 Export partners Mar_15 Mar_16 AprMar BANGLADESH (Source: Department of Commerce and CSO) China is the topmost importer for Non ferrous Metals importing 17.6 percent of India s total export of Non Ferrous Metals during April Republic of Korea and Malaysia imports 11.4 percent and 10.2percent respectively during April Table 14: Export of Electrical Machinery and Components Export partners Mar_15 Mar_16 Apr Mar SUBSTANTIAL CUMULATIVE GROWTH COUNTRIES Export to World U S A SINGAPORE BANGLADESH CHINA JAPAN TURKEY ITALY VIETNAM SOC REP HEAVY CUMULATIVE DECLINE COUNTRIES GERMANY U K FRANCE UAE SAUDI ARAB NIGERIA NEPAL OMAN (Source: Department of Commerce and CSO) EEPC INDIA 17

19 USA is the largest importer of Electrical Machinery and Equipments from India during April importing 13.8 percent from India s global export of the product group. Germany retains its second position during April importing 6.5 percent. Exports to UK and France witnessed decline during April over the same period last fiscal despite being the third and fourth largest export destination for Electrical Machineries importing 5.3 and 5.1 percent respectively. Table 15: Export of Aircrafts & Spacecrafts Export partners Mar_15 Mar_16 Apr Mar SUBSTANTIAL CUMULATIVE GROWTH COUNTRIES Export to World GERMANY CZECH REPUBLIC RUSSIA ISRAEL CANADA ITALY AFGHANISTAN TIS AUSTRIA HEAVY CUMULATIVE DECLINE COUNTRIES SRI LANKA UAE U S A U K FRANCE SINGAPORE NETHERLAND IRELAND (Source: Department of Commerce and CSO) In case of Aircrafts and Parts, Sri Lanka once again retains its top rank in importing percent of India s total exports of Aircrafts and Parts during EEPC INDIA 18

20 April UAE ranks second importing 19.4 percent of India s global exports of Aircrafts during the same period. USA holds the third position importing 13.7 percent of India s Aircrafts & parts during April Table 16: Export of Ships, Boats and Floating Structures and parts Export partners Mar_15 Mar_16 Apr Mar SUBSTANTIAL GROWTH COUNTRIES Export to World JAPAN NORWAY BAHARAIN IS INDONESIA NETHERLAND UNSPECIFIED MALDIVES EGYPT A RP HEAVY DECLINE COUNTRIES UAE SINGAPORE MALAYSIA SRI LANKA SOUTH AFRICA QATAR ISRAEL FRANCE (Source: Department of Commerce and CSO) UAE, Singapore, Japan and Norway are India s top export destinations in Ships, Boats and Floating Structures and parts during April 2015 sharing almost 69.3 percent of total export of this product group. UAE being one of the top four importers of this group importing 25.2 percent in India s global exports registered a positive monthly growth of 286 percent in 2016 but negative cumulative growth of percent. EEPC INDIA 19

21 Table 17: Export of Auto Components Export partners Mar_15 Mar_16 AprMar SUBSTANTIAL GROWTH COUNTRIES Export to World MEXICO BANGLADESH U ARAB EMTS JAPAN NEPAL SRI LANKA FRANCE SPAIN HEAVY DECLINE COUNTRIES U S A TURKEY THAILAND GERMANY U K BRAZIL INDONESIA ITALY (Source: Department of Commerce and CSO) USA retains its top most import ranking from India covering around 21 percent share in India s global exports of Auto Components/parts, witnessing a negative growth in 2016 as well as during April Mexico ranking sixth in India s global exports of Auto Components/parts recorded a significant 40 percent yearonyear growth during April Turkey and Thailand holds the second and third position importing 9.3 percent and 4.7 percent respectively of Indian auto component/parts, during April Conclusion Merchandise exports from India conceded yearonyear drop for the sixteenth straight month in to US$22.72 billion, while imports fell to $27.79 billion during the month. India s trade deficit narrowed to over a fiveyear low of $5.07 billion in, with imports declining sharply by 21.6 per cent yearonyear as against a decline of 5.5 per cent of exports. Imports of oil and gold the two highest constituents of India s EEPC INDIA 20

22 import bill registered a sharp decline in, falling by per cent and 80.5 per cent, respectively. On exports front, the engineering goods recorded a sharp dip in exports by to US$ 5.2 billion. However, as mentioned earlier, the pace of decline in engineering exports decelerated both in February and compared to the previous months of December and January. The fall in engineering exports in 2016 is mainly driven by Non ferrous sectors like Zinc, Nickel, Copper and Aluminium products, Aircraft and Space craft, Iron & Steel. Cumulatively Ships Boats and Floating Structures is the worst performer after Nickel products during April of the current fiscal while Aircrafts & Spacecrafts, Iron and Steel are the other sectors that has witnessed worst decline in exports during the said time period. Among the top 25 importers of India's engineering exports during the April , only three recorded growth in imports from India. For the rest 22 countries, India saw lower overseas shipment. **************************** EEPC INDIA 21