China, Vietnam out beat India in exports of merchandise

Today’s is a condition when India has been out beaten by China and Vietnam as far as exports of merchandise is concerned. While China has beaten India in scripting a resurgence in exports of the same to the US and the EU (excluding the UK), Vietnam has not only outpaced us but even China in the recovery.

This means that India’s export contraction may have been accentuated by factors other than just a Covid-induced demand slowdown mainly in the West. Forget China, in absolute term, even Vietnam has now beaten India in exports to the EU having already surpassed it in supplies to the US in 2018.

Between January and November 2020, while India’s shipment to the US came down by 13.3 per cent on year to $46.3 billion, China’s dropped by only 5.8 per cent to $393.6 billion despite a trade war and growing criticism of Beijing’s mishandling of the Coronavirus outbreak. Vietnam’s exports to the US rose by as much as 20 per cent to $72.7 billion, according to the US government data.

India’s exports to all destinations were down by 16 per cent until November last calendar year. Similarly, India’s exports to the EU (excluding the UK) witnessed a steep 17.2 per cent decline to 30.6 billion euros in the January-November period, showed the official data with the EU.

However, China’s shipment to the 27-member block rose by 4.3 per cent to 350 billion euros during this period and Vietnam’s fell only marginally by 0.5 per cent to 31.9 billion euros.

India’s inherent structural bottlenecks, including high logistics costs, unimpressive trade infrastructure, container shortage and inadequate flow of cheaper credit, seem to have just exacerbated the Covid-induced stress in its export sector. Its exports have risen only for a second time in 10 months in December, that, too, by just 0.1 per cent.

On a firm note, one can say that India imposed a much more stringent lockdown (from March 25 until it was eased gradually from June) than any of these nations. A domestic demand compression battered the country’s imports much harder than its exports. Consequently, import-sensitive export segments, too, saw a sharp drop. Also, India was among the last set of nations where the pandemic spread its tentacles, which means it should be among the last to stage a rebound. To that extent, the contraction in its exports is understandable.

However, what signals a deeper fissure in India’s export resurgence story is the loss of momentum since the 6.1 per cent expansion in September, the first since February. Its outbound shipments faltered by 5.1 per cent in October and 8.7 per cent in November before recording the marginal rise last month.

Exporters have complained that a combination of a rise in the cost of shipping, the rupee appreciation and a huge cut in government benefits has eroded their competitiveness. The allocation under the Merchandise Exports from India Scheme (MEIS) for the first three quarters of this fiscal was reduced to less than 40 poer cent of last year’s total.