India's goods exports reached a record high of $44.24 billion in June, contributing to a surprising GDP growth rate of 7.8% for the April-June quarter. Net exports alone added 3 percentage points to GDP growth. Total goods exports for April-June increased by 15% year-on-year to $129.32 billion, with non-petroleum and non-gems and jewelry exports growing by 12% to $99.04 billion, surpassing previous years' growth rates.
However, this overall positive picture masks significant challenges in specific sectors. High-value exports like engineering goods, electronics, and pharmaceuticals saw growth rates of 18.1%, 22.6%, and 6.8%, respectively. In contrast, labor-intensive sectors such as textiles and leather products experienced declines of 12.4% and 4.7%. Low-margin exports, including fruits and vegetables, ceramics, glassware, jute products, and tea, also saw considerable drops, with declines ranging from 10.3% to 25%. Out of 31 export sectors, 11 reported a year-on-year decrease during the April-June period.
The crisis in West Asia has significantly impacted trade, leading to increased logistics costs that squeeze profit margins, particularly for exporters of low-margin goods. While high-margin products can absorb these costs, others must sacrifice profits to maintain market share. Despite this, a sharp depreciation of the rupee, valued at 94.7 per dollar at the end of June (a 10% decline from the previous year), has enhanced the competitiveness of Indian exports. Ajay Sahai, Director General & CEO of the Federation of Indian Export Organisations, noted that the rupee's 7% depreciation combined with an 8% appreciation of the Chinese yuan gives Indian exporters a 15% advantage over China.
India has also strategically diversified its exports and increased trade with countries with which it has signed Free Trade Agreements (FTAs). This has helped mitigate the impact of the West Asia crisis. For instance, exports to Singapore nearly doubled during the April-June period, surging by 101%, while exports to the UAE fell by 11%. This redirection of focus has been crucial in maintaining export momentum amidst global disruptions. The RBI's substantial dollar inflows, exceeding $136 billion from special deposit programs, have strengthened the rupee and provided the central bank with significant firepower to stabilize the currency, with some economists expecting the rupee to remain in the 94-95.5 range in the near term.
