India H1 EXIM robust, despite slow growth
A.P. Moller –Maersk’s trade report for H1 2017 shows slow global ex-im for India. Two veterans of the industry throw light on India’s growth in global containerised trade.
The year 2017 has been one of great contradictions. It started on a part-positive and part-sceptical note, as the average citizen tried to re-adjust his priorities to the government’s highvalue currency swap, while simultaneously rejoicing the checks introduced on black-money holders in the system.
Soon after came the implementation of the Goods and Services Tax (GST), the impact of all these changes is being reflected in India’s ex-im performance in the first half of 2017, as per an analysis by Maersk Line. Closing at 7 per cent yearon-year growth, down from 11 per cent last year, India’s global EXIM climate in the first six months has been affected by slower exports as well as slower imports – 8 per cent and 6 per cent respectively, compared with 11 per cent in H1 2016.
“In terms of overall growth, we did see a slowdown in the first half of the year due to all the policy changes. Looking at the way the situation is turning now with the effects of demonetisation and GST wearing off, I am confident that the second half of 2017 will deliver strong trade growth for the geography,” explains Steve Felder, Managing Director – India, Sri Lanka, Bangladesh, Nepal, Bhutan and Maldives, Maersk Line.
India’s global trade leads BRICS growth
While India’s trade growth with the world is subdued, its position among the BRICS nations is heightened, as its ex-im growth has pushed it ahead of China to lead global trade for the BRCIS nations, and enabled them to outpace the global average. The five BRICS partners together contribute nearly one-quarter of global economic output and half of world economic growth. With respect to trade among the five BRICS countries though, China continues to play the more dominant role, more so as India’s exports with these alliance partners saw a reduction to three per cent.
Indian exports driven by trading partners & reefer cargo
A 202 per cent growth in exports to Sri Lanka helped India maintain its steady export growth rate at 8 per cent. This was largely driven by increased demand for India-made cement, which forms a major component of the total exports from the Southern states of India.
The United Arab Emirates, followed by Saudi Arabia, also played their part in pushing up exports from India – there was significantly high demand for textiles and apparel from the former and an increase in demand for seeds, beans, cereals and flour from the latter. Exports to the United States remained flat, while exports to the United Kingdom declined significantly, ostensibly owing to the impending formalisation of Brexit. The impact of this has led to a substantial decline in exports from East and South India, which are major trading partners with the United Kingdom. The only commodity that has seen an upward movement in exports to the United Kingdom from India is pharmaceuticals, which registered impressive export growth of 87 per cent. As one of the many commodities driving reefer (refrigerated containers) growth in the geography, the increasing demand for pharmaceuticals is expected to add momentum to India’s drive to improve its existing infrastructure for handling and storing refrigerated cargo. The top commodities that are driving reefer growth from India is fruits and nuts, with exports of grapes leading the way. “The cold chain market is a rapidly evolving opportunity, as the demand for refrigerated products spirals in India and internationally. In fact, in India alone it has been growing at 18 per cent in the past years and a similar trend is expected in the time to come,” says Ajit Venkataraman, Managing Director, APM Terminals India.
Other interesting facts related to exports from India are:
Fish at 46 per cent growth, vegetables at 44 per cent growth and metals at 23 per cent growth are the top three commodities driving exports from India
India has moved from being an importer of metals to becoming a major exporter of this commodity, with East India driving exports to North American and Mediterranean countries
China doubles imports to India
India’s traditional trade partners saw their share of imports into India decline significantly as the realities of demonetisation and GST set in. Each one registered negative growth as previously fast-moving commodities like foodstuff, frozen fish and chemicals saw demand decline. On the other hand, China almost doubled its imports to India to close at 29 per cent growth in the first half of 2017.
The cold chain market is a rapidly evolving opportunity, as the demand for refrigerated products spirals in India and internationally The pre-GST rush, especially for appliances and electronics resulted in this spike. We expect imports from China to stabilize
“The pre-GST rush, especially for appliances and electronics resulted in this spike. Now that this phase has passed, we expect imports from China to stabilise and volumes to revert to pre-GST days,” points Felder.
Ajit Venkataraman Managing Director APM Terminals India
Steve Felder Managing Director – India, Sri Lanka, Bangladesh, Nepal, Bhutan and Maldives, Maersk Line