New Delhi: Merchandise trade between India and the US grew nearly 25 per cent in October year-on-year, according to US Census Bureau data. However, Indian analysts and exporters say that this positive trend could change in the coming months due to global recessionary trends and less demand in markets like the US.
US Census data shows that India-US merchandise trade amounted to $134.148 billion from November 2021 to October 2022 as compared to $107.429 billion in the same period a year before. This indicates an increase of 24.87 per cent in October year-on-year.
The Indian apparel industry — for which the US is a key export market — noted a 16 per cent contraction in exports in the month of October.
“…Most of the traditional markets of Indian RMG (ready-made garments) including the UK, the EU and the USA are witnessing recession and global headwinds, leading to shrinking of demand on one side and buyers asking for 15 per cent discount on the other…,” Narendra Goenka, chairman of Apparel Export Promotion Council (AEPC) — the official body of apparel exporters in India — said in a statement Wednesday.
Earlier this year, when the India-US goods trade rose 40 per cent higher between January and May compared to the same period in 2019, the top Indian export driving the surge appeared to be gems and jewellery. However, this sector is expected to take a hit in the coming quarters due to the global downturn.
“Gems and jewellery sector has been affected by global recessionary trends, and it is unlikely that Indian exporters, especially to the US, will see the kind of growth they did last year,” Colin Shah, managing director of Kama Jewellery and former chairman of Gem and Jewellery Export Promotion Council of India (GJEPC), told ThePrint.
He added that retail sales will be 5-10 per cent less than last year. “The next quarter will be slow for gems and jewellery exports, but I expect this will correct itself from August 2023.”
This comes despite the fact that the festive season tends to see an uptick in demand, especially for apparel and gems and jewellery goods.
Also Read: Modi govt just expanded scheme to give exporters tax refunds. Why steel industry isn’t cheering
US Fed’s next move will be key
According to Federation of Indian Export Organisation (FIEO) DG & CEO Ajay Sahai, the rising inflation and low purchasing power have affected demand in the US.
“Demand for such products has slowed down with rising inflation in the US affecting purchasing power. Departmental stores are also maintaining lean inventories as the cost of building inventories has gone up due to a hike in interest rates,” he told ThePrint.
A non-profit entity, the FIEO is the apex body of the government recognised export promotion councils, commodity boards and export development authorities in India.
To tackle inflation, the US Federal Reserve has raised interest rates six times this year, sending ripples through the global economy amid high commodity prices brought on by the Ukraine war.
The US Federal Open Market Committee (FOMC) meeting Wednesday is expected to raise the interest rates in America for the seventh time.
“The next move by FOMC will be very important. We are watching the trends of sales in Christmas and New Year to evaluate the situation better,” Sahai added.
(Edited by Theres Sudeep)
Also Read: How India could ride out oil price rise thanks to cheap supplies from Russia & more FDI