The year 2017 has been one of great contradictions. It started on a part-positive and part-skeptical note, as the average citizen tried to re-adjust his priorities to the Government’s high-value 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 EXIM performance in the first half of 2017, as per an analysis by Maersk Line, the world’s largest container shipping company. Closing at 7% year-on-year growth, down from 11% last year, India’s global EXIM climate in the first six months has been affected by slower exports as well as slower imports – 8% and 6% respectively, compared with 11% in H1 2016.
“Whereas 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 demonetization and GST wearing off, I am confident that the second half of 2017 will deliver strong trade growth for the geography,” explains Steve Felder – recently appointed Managing Director for Maersk Line – India, Sri Lanka, Bangladesh, Nepal, Bhutan and Maldives.
India’s global trade progress declines but leads BRICS growth
While India’s trade growth with the world is subdued, its position among the BRICS nations is heightened, as its EXIM 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 3%.
India’s exports driven by unlikely trading partners & reefers cargo
A 202% growth in exports to Sri Lanka helped India maintain its steady export growth rate at 8%. 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 formalization 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%. 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.
While the Government is playing its part in trying to iron out certain challenges, the Industry needs to gear up to offer multi-commodity EXIM storage and distribution infrastructure which are critical to enabling this growth. “As a company offering Industry leading solutions in Shipping and Logistics to customers worldwide, Maersk is well ahead in understanding and offering these specialized services which apply to several products that are traded from India. We believe we are well positioned to be able to cater to this growing market demand. Today, we already manage customers both local and international who deal with fruits, vegetables, meats and pharmaceuticals that make up a major part of the cold storage EXIM business.” Says Ajit Venkataraman, Managing Director, APM Terminals India Pvt. Ltd.
Other interesting facts related to exports from India are:
- Fish at 46% growth, Vegetables at 44% growth and Metals at 23% 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 while United States, Germany and South Korea see major decline
India’s traditional trade partners saw their share of imports into India decline significantly as the realities of demonetization and GST set in. Each one registered a 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% growth in the first half of 2017. This was mainly lead by a substantial increase in demand for appliances and kitchenware coming from South and East India, which was in turn being fulfilled mainly by China.
It is noteworthy that appliances and kitchenware also emerged to become the fastest growing import commodity for India at 41% growth in the first half of 2017. This was followed by fruits and nuts, which grew to 23% during the same period.
Some other interesting import-related insights are:
- Imports growth for India holds steady across North, East and South India with each individually registering an increase to 9%
- Imports from Saudi Arabia outpaced India’s exports to that country
- Import volume of containerized reefers from North American countries grew substantially, with fruits and nuts growing by 115%
- Imports from South Korea dropped significantly to close in the negative in the first half of 2017 – this grew by 111% in the first half of 2016
- Paper imports grew only by 1% in the first half of this year, as opposed to 33% growth in the first half of 2016
2017 expected to close on a positive note
In conclusion, in spite of the mixed developments in the first half of 2017, India’s growth in global containerized trade remains impressive relative to most sizable markets around the world. Moreover, with the impact of key policy changes now stabilizing, it is our expectation that this will continue to strengthen throughout the rest of the year.