Base effect, engineering goods drive February exports

The main reasons for India's exports growing to 17.5% in February 2017 was base effect and a massive increase in the shipment of engineering goods, especially iron and steel.

“This huge growth of 17.5% in exports is partly due to base effect of 9.7% and partly due to a whopping increase in engineering goods,” according to State Bank of India (SBI) research team headed by group chief economic advisor Soumya Kanti Ghosh.

The Commerce Ministry had released trade data last week that showed that the export growth had shot up by 17.48% from April 2016 to February 2017. But, this was also because of the comparison to the same period in 2015-16, which was at a low of 5.5%.

In fact, the February spurt was a 64-month high. It may be noted that between November 2009 and October 2011, the exports growth averaged at 38.2%, with the maximum growth being at 56.8% in March 2010.

The contribution of engineering goods to India’s total exports was 10.2% in February, when compared to just 2.7% in January 2017. If one were to exclude the engineering goods, the exports growth would be only at 9.3% in February, the report said.

Among the engineering goods, it was steel and ferro alloy that had shown a significant increase of 159% in January. “We believe that in February 2017, the same trend would have continued,” said the report.

“The growth in engineering goods driven by products of steel and ferro alloys is a welcome development for Indian steel sector that has been stuck in the vicious cycle of global overcapacity and price declines,” the report said, adding that the surge in export growth is a combination of both price and quantity effect.

There has been a general increase in exports globally. As per the latest WTO data for December 2016, the exports growth has also been positive for the US (5.61%), EU (1.68%) and Japan (10.87%); however, China exhibited a negative growth (-6.2%). “This only indicates that the bellwethers of global activity are finally getting faster including Japan, European Union, Asian economies and even Latin American economies. We hope such a global recovery is not a flash in the pan anymore,” said SBI Research.