India surpassed the USD 400 billion export target for 2021-22 by March 23, 2022. But the surge in value of exports in recent months is not likely to have reflected an accompanying increase in the volume of exports of all commodities. On the contrary, the steep increase in global commodity prices is likely to have contributed considerably to the growth in export value of many commodities.
Global crude oil prices rose to record high levels in the past three months. The Indian basket of crude oil saw a 61.1 per cent y-o-y increase in prices in the March 2022 quarter. Global prices of many other commodities also surged in February and March 2022 amidst the Russia-Ukraine war.
As per the most recent data on the volume of exports, almost half of the 95 commodity categories that were exported in both February 2021 and February 2022 recorded a y-o-y fall in export volume in February 2022.
Commodities including organic chemicals; spices; iron ore; dyes; raw cotton; coal, coke & briquittes and sesame seeds posted double-digit growth in unit value of exports in February 2022. Implicitly, their prices grew in double digits. Similarly, the effective prices of rice; vegetable oils; niger seeds and two & three wheelers also grew by 2-8 per cent y-o-y. However, exports of these commodities shrunk considerably in terms of volume. These commodities had a share of around 12 per cent in the total value of India’s merchandise exports during April-February 2021-22.
Value of exports of commodities such as petroleum products; iron & steel; aluminium & its products; marine products; cars; sugar and wheat rose sharply in February 2022. These products account for over 32 per cent of total exports in terms of value. The increase in value can be traced to growth in both the unit value and volume of their exports. Indian exporters were able to take advantage of global supply disruptions and high commodity prices in February 2022 by increasing the export volume of these commodities. Petroleum products; iron & steel; aluminium; wheat; motor vehicles and sugar saw an especially sharp increase in the volume of exports.
In contrast, some commodities witnessed a fall in unit value of exports in February 2022. But the volume of their exports rose substantially. These include manufactured goods such as some categories of drugs and pharmaceuticals; plastic sheets, film & plates; silk & handmade carpets; cement, clinker & asbestos cement; leather footwear components; finished leather and crude fertilisers. Other commodities like buffalo meat, processed minerals, fresh vegetables, processed fruit & juices and tea also fall under this group. They have a share of around nine per cent in total value of exports.
A few other commodities, of which India is not a major exporter, including cashews; processed vegetables; raw jute and oil meals also registered a y-o-y fall in unit value of exports in February 2022. This was accompanied by a fall in the volume of their exports as well. But the share of these commodities in the total value of exports is almost negligible, at less than one per cent.
A sustained increase in global prices of crude oil and other commodities is likely to reflect in continued growth in the overall value of India’s exports in coming months. For commodities such as wheat and steel, the volume of exports is also likely to remain high.
Indian wheat traders have entered into contracts to export 3-3.5 million tonnes of wheat during April-July 2022, according to the Food Secretary as quoted in Business Standard. This would surpass the 2.1 million tonnes of wheat exported by India in the whole of 2020-21.
Export volumes of iron & steel are also likely to remain high in the immediate future. Indian exporters are aiming to increase steel exports to countries in the European Union, which were earlier importing steel from Russia. China could compete following the easing of its emission targets for the steel industry. Nevertheless, Indian iron & steel exports will remain high in the coming few months. Iron ore exports to China, which is its largest export destination, are also expected to recover with the easing of China’s emission targets.
India has signed the Comprehensive Economic Partnership Agreement (CEPA) with United Arab Emirates (UAE), which will come into force from May 1, 2022. The volume of India’s exports of textiles, gem & jewellery, medicines, agricultural products, footwear, leather, sports goods, engineering goods, auto components and plastics to UAE is likely to rise, as per the Ministry of Commerce & Industry. The India-Australia Economic Cooperation and Trade Agreement (ECTA) is also expected to boost export volume of several commodities including textiles, leather products, footwear, gems & jewellery, and agricultural products to Australia. Other potential free trade agreements with countries including UK, Israel and Canada could further boost the volume of India’s exports in the coming year.