Stronger export growth to benefit MSMEs

India’s merchandise export growth stood at 10.3% in August, 2017, which was 3.9% in the previous month. Export of agriculture, engineering goods, chemical industry and electronic goods grew at a healthy rate in FY18 (YTD). As a large number of MSMEs are involved in these sectors, a healthy growth in export indicates that their earnings from export will be robust. The growth in volume will offset the loss caused by a stronger rupee. As per Ministry of Commerce data, MSMEs are outperforming the big players in external market. MSMEs share in India’s overall export has accelerated to 49.8% in FY16 from 42.4% in FY14. This trend shows that share of MSMEs might have exceeded 50% in FY17.

In order to access the performance of external sector, SMERA has analysed the trend of region-wise growth in exports. The figures in table 2 (below) shows that India’s export to Japan, Singapore, Hong Kong, China and the US is very encouraging. These countries along with EU and BRICS account for nearly 70% of India’s exports. Growth rate of these economies are expected to accelerate to nearly 4.5% in 2018 from 1.5% in 2016 (based on IMF’s projection for individual countries). This will accentuate India’s external demand and accelerate the export growth. SMERA finds a strong positive correlation between GDP growth of these selected countries and growth in India’s export.

India’s export to the BRICS nation has recorded a 23.5% growth in FY18 YTD, which is a market of around $14.6 trillion (as on 2016). Despite the fact that the BRICS nations (excluding India) have recorded de-growth of (-) 4.5% and (-) 0.8% in 2015 and 2016 respectively (USD term), SMERA reckons that India’s BRICS partners will grow at around 5-6% between 2017 and 2018. In 2015, India’s major exports to BRICS nations were mineral oil (8% of the sector’s overall export), animal and vegetable fat and oil (34%) sugar (6%) and precious metal (10.5%). Therefore, these sectors are likely to benefit from recovery of the BRICS economy.

Table -1: Contribution of MSMEs and large players in overall Exports

Financial Year

Overall Export

($ bn)

% share of MSME

% share of large players

Growth in overall export

FY14

314.90

42.42

57.58

4.91

FY15

310.10

44.76

55.24

-1.51

FY16

262.20

49.86

50.14

-15.45

FY17

276.40

*

*

5.40

 

Source: Ministry of Commerce, SMERA Knowledge Center

Note: * indicates data for the period is not available

Table -2: Region-wise growth in export (% YOY)

Share (% age)

FY15

FY16

FY17

FY18*

US

16.2

8.79

-10.61

4.36

12.86

UAE

10.9

8.08

-8.3

3.16

-4.32

Hong Kong

5.3

6.47

-10.87

16.7

17.43

Singapore

3.7

-21.01

-21.13

23.83

26.3

Japan

1.6

-21.25

-13.42

-17.13

23.33

China

3.6

-20.29

-24.73

13.31

27.63

Europe

20.3

-2.89

-10.1

6.84

3.8

Africa

8.5

4.54

-23.84

-7.48

4.38

BRICS

6.7

-9.05

-33.55

7.65

23.48

World

100

-1.51

-15.45

5.4

8.6

 

Source: CMIE, SMERA Knowledge Center

Note: ‘*’ is Apr to July

 

Table -3: Trade performance in 2017 (YTD)

Overall export

Petroleum

Non-petro

Total imp

Oil

Gold

Non-oil non-gold

Jan-17

5.17

31.57

2.29

11.7

61.53

-30.23

6.01

Feb-17

22.68

31.97

21.73

24.86

60.6

150.98

8.14

Mar-17

27.12

69.81

22.61

45.15

101.29

269.76

19.96

Apr-17

17.92

41.68

15.28

47.69

28.76

188.5

42.48

May-17

7.2

20.64

5.79

34.66

28.32

256.98

20.3

Jun-17

4.07

2.9

4.22

18.19

11.47

80.48

16.31

Jul-17

3.94

20.26

1.81

15.42

15.02

101.17

11.03

Aug-17

10.29

36.56

6.86

21.02

14.22

72.85

20.15

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