This Sector Is Beating The Export Slowdown

Electronics, drug, and pharmaceutical exports continue to grow amid a broad-based decline in outbound merchandise shipments.

The merchandise trade deficit narrowed to $20.1 billion in June on lower exports and imports. Exports fell by 22% year-on-year to $33 billion in June, while imports declined by 17.5% to $53.1 billion, led by weaker global growth and lower commodity prices.

Shipments of only nine of the top 30 major commodities rose in June on an annual basis. Of the major commodities that saw a rise, electronic goods continue to lead, while exports of drugs and pharmaceuticals also held up.

• Exports of electronic goods rose by 45.4% in June to $2.4 billion.

• Exports of drugs and pharmaceuticals rose by 5.1% to $2.2 billion.

For the April-June quarter, electronic goods exports rose by 47.1%, while drugs and pharmaceuticals rose by 5%.

To be sure, imports of electronic goods also rose by 8.5% to $6.6 billion in June. For the quarter, imports rose by 6.3%.

The share of electronic goods, too, has seen a rise. They now comprise 7.4% of all merchandise exports—almost twice as much from an year ago.

As such, electronic goods now comprise the third largest export commodity, after engineering goods and petroleum products.

The rise with regards to electronic goods is primarily on account of higher exports of mobile phones from India, given the PLI incentives that are being provided, said Suman Chowdhury, chief economist and head of research at Acuité Ratings & Research.

David Sinate, chief general manager for research and analysis at India Exim Bank, said favourable government policies, such as the PLI scheme, have been instrumental in the strong growth in electronics exports over the recent period.

Many of the global companies have started to use India as a manufacturing base for smartphones and while there is still a high dependence on component imports, such steps towards indigenous manufacturing will lead to development of necessary technological capabilities in the longer run, he said.

India is also a leading exporter of vaccines to third-world countries and this position was further enhanced during the Covid pandemic, Chowdhury said. Bulk drug imports from India are also gradually on the rise due to some countries’ intent to develop alternate suppliers apart from China, he said. Typically, demand growth in this category is steady and not linked to the growth outlook, Chowdhury added.