Maersk: India's Containerized Trade Remains Flat
India’s import and export container trade in Q3 2019 (July-September) remained flat compared to the global growth rate of 1.5 percent.
The slowdown coincides with weaker domestic demand, says Maersk in it's India Trade Report. It is also a reflection of the broad-based cyclical weakening of the economic environment in all the main global economies and the negative effects from escalating trade restrictions.
The trade war between the U.S. and China has led to shifts in trade structures, with global importers having shifted sourcing from China to other countries such as Vietnam, Taiwan, Bangladesh and South Korea. Thailand, Mexico and India are showing early signs of being next in line to benefit.
In India, the economic uncertainty, tight liquidity, decline in global export orders and evolving domestic political scenario also affected the flow of investments and added to currency volatility. While imports achieved subdued growth, the overall fiscal impact was nullified by an identical contraction in exports.
China is among the top five import countries for India. However imports have declined. India is looking for greater access to the Chinese market as it seeks to arrest the fall in farm commodity exports. Private companies from India and China signed more than 120 MoUs for export of various products from India, including sugar, chemicals, fish, plastics, pharmaceuticals and fertilizers.
Steve Felder, Managing Director, Maersk South Asia, said “The current slowdown witnessed in the last two quarters can be accredited to tight liquidity and working capital, weaker domestic consumption patterns and slower global growth. As the global economy continues to face challenges, and trade tensions between major economies ensue, many leading global importers have begun exploring trade alternatives to China.
“The U.S. has emerged as a strong trade partner with India showing growth in exports as well as imports. India boosted its 'Ease of Doing Business' in World Bank’s 2020 rankings. This provides a huge opportunity to entice multinationals and global investors to grow their trade with India.”
Apparel exports are exposed to multiple threats like U.S.-China trade tension, Brexit uncertainty and almost flat E.U. economies. Although India’s apparel exports have revived during the current financial year, exports aim to grow by four percent Y-o-Y during 2020 after two consecutive years of contraction. However, India’s textile and apparel industry is facing strong headwinds as key competitors such as Pakistan, Bangladesh and Vietnam are given preferred access in Northern Europe - India’s biggest textile market.
Paper and metal scrap continue to be top trade commodities. India serves as one of the growing countries for U.S. and E.U. recyclers looking for export markets, specifically for nonferrous and paper scrap.
India’s import activity in Q3 2019 increased due to price incentive caused by the declining value of mixed paper and some old corrugated container grades on the global market, prompted by China’s stricter standards for recovered fiber imports. The Indian metal recycling industry is set to register an annual growth of 11 percent.
China’s domestic protein production is down by five percent in 2019, influencing the demand for imports, making it one of the primary reasons why India has seen export growth to China as far as seafood and other refrigerated (reefer) products are concerned.
For reefer exports to the South East Asia region, vegetables and shellfish witnessed the highest growth at 13 percent and eight percent respectively, while meat export growth remained flat. Global free trade agreements might impact India’s reefer exports to the E.U.
Additionally, a government ban on onion exports resulted in overall market for onion exports being contracted roughly by 26 percent Y-o-Y. This move came to curb the export shipments of onions and help bring down soaring prices in the domestic market, resulting from floods in parts of the major onion growing states of Maharashtra and Karnataka.
Overall exports to Africa grew by 11 percent led by appliances and kitchenware, vehicles and seeds, beans, cereals and flour. Kenya and Nigeria are India's usual export trade partners, but Q3 saw an addition of Djibouti and Tanzania. Import growth from African countries to India remained steady at two percent. Fruit and nuts, metal and wood were the top commodities.
“The Government has ambitious goals of reaching to a $5 trillion economy. To achieve this, there has to be a focused approach in implementing reforms and measure to drastically improve the landside infrastructure to boost logistics further and adopt digitalisation as rapidly as possible,” said Felder. “This will help catalyze the export growth, supported by robust policy reform. In its second term, the Government has a strong focus on procuring FDI inflows, structuring policy reforms and facilitating infrastructure development. Furthermore, an impetus on increasing industrial manufacturing while easing corporate tax structures will further prove to be an advantage to the Indian economy.”