Shipments to West Asia decrease by nearly 50%

Shipments to West Asia decrease by nearly 50%

Exporters say the Covid outbreak accentuated a demand slowdown caused by subdued oil prices in the West-Asian region, mainly the UAE and Iran, while frosty political ties with Nepal and Pakistan has hit supplies to South Asia.

It’s not just a Covid-induced slowdown in key markets — the US and the EU — that is troubling Indian exporters. The oil revenue-dependent west-Asian nations, traditionally the third-largest destination, contributed the most to India’s export contraction this fiscal.

The country’s outbound shipment to West Asia crashed by more than 46% on year in the April-August period of this fiscal to $11.9 billion, way above a 27% contraction in its overall merchandise exports to $97.7 billion. Similarly, exports to politically-sensitive South Asia plunged by 35% from a year before, show the latest DGCIS data.

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Consequently, the share of West Asian nations in India’s exports dropped to just over 12% in the first five months of this fiscal, against 17% a year before. Even south Asian countries made up for only 6.1% of India’s exports, against 6.9% a year earlier.

If the situation persists, it can potentially delay an export recovery. As such, merchandise exports, which grew in September after seven successive months of decline, lost the momentum again in October and recorded a 5.4% fall, highlighting fragile external demand.

Exporters say the Covid outbreak accentuated a demand slowdown caused by subdued oil prices in the West-Asian region, mainly the UAE and Iran, while frosty political ties with Nepal and Pakistan has hit supplies to South Asia.

Interestingly, a 27% year-on-year jump in exports to China in the April-August period, despite the pandemic and a border clash, has driven up India’s shipment marginally to North-eastern Asia, which has now replaced the EU as New Delhi’s largest export destination after the Americas. Exports to the EU dropped by almost 32% to $15.9 billion up to August this fiscal.

In West Asia, exports to the UAE plunged the most, by 59% to $5.2 billion until August this fiscal, while those to Iran dropped by 49% to $907 million and Saudi Arabia by 13% to $2 billion.

India usually supplies basmati rice, textiles and garments, capital goods, automobiles, gem and jewellery and organic chemicals in large volumes.

In South Asia, Nepal, which usually depends heavily on Indian supplies, cut down on purchases amid a row with New Delhi even as its leadership cosied up to Beijing. Exports to Nepal crashed by over 47% to $1.6 billion until August, while those to Pakistan, unsurprisingly, declined by 85% to just $93 million.

Trade with Pakistan has taken a massive beating after New Delhi stripped Islamabad of the most-favoured nation status unilaterally granted by it, in the wake of the Pulwama terror attack and the Balakot airstrike last year. Of course, exports to Bangladesh dropped at a slower pace of 19% to $2.5 billion between April and August. India exports a broad range of items to South Asian nations, including petroleum products, cereals, cotton, organic chemicals, phamaceuticals, steel and capital goods.

India’s exports had witnessed a record 61% crash in April in the wake of the lockdown, although the contraction subsequently narrowed to 12.7% in August. However, the contraction in October after a rise in the previous month, reflected the bumps in the path to recovery.

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