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STRONGER EXPORT GROWTH TO BENEFIT MSMES

28 Sep 2017

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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


Source: Ministry of Commerce, SMERA Knowledge Center

Note: * indicates data for the period is not available


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


Source: CMIE, SMERA Knowledge Center

Note: ‘*’ is Apr to July


Table -3: Trade performance in 2017 (YTD)