India's machinery exports to Russia jump three-fold in a year amid war

India's machinery exports to Russia have skyrocketed by three times in just one year, amidst ongoing conflict. The increase in business transactions between these two countries demonstrates substantial growth in trade relations.

According to exporters, while the exports of Indian products to the rest of the world are experiencing a decline, there has been a significant increase in the export of engineering goods to Russia and other Commonwealth of Independent States (CIS) countries. The export figures have surged almost three times when compared to June of the previous year.

The ongoing conflict between Russia and Ukraine, which has been going on for a year and a half, has resulted in a significant increase in the prices of food and fuel. Additionally, there has been a notable decrease in the demand for goods and services in Western countries. Consequently, Indian exports of goods have suffered a decline consistently over the past six months.

In June 2023, India experienced a decrease in its export of engineering products to several important markets, such as the United States, European Union, and China. However, there was a positive growth in shipments to regions like West Asia and North Africa (WANA), North East Asia, and CIS countries.

According to the Engineering Exports Promotion Council (EEPC), the amount of engineering goods sent to Russia increased nearly three times in June 2023, reaching $116.9 million. In total, the exports of engineering goods soared four times from April to June in the current financial year, amounting to $337.4 million compared to $89.7 million in the same period of the previous year, as reported by the EEPC.

According to the most recent statistics, the amount of engineering products exported to the United States experienced a decrease of 12.5%, resulting in a total value of $1.45 billion, compared to $1.65 billion in the same month of the previous year. When considering the overall duration of April to June for the years 2023 and 2024, the decline in shipments value was even more significant, with a total of $4.30 billion recorded compared to $5.32 billion during the same period in the previous year.

The EU experienced a significant decline in engineering exports, with a staggering 16.2% drop, reaching only $1.51 billion in June 2023. Moreover, when considering the cumulative data from the months of April to June in FY24, the total exports plummeted by nearly 10% to a mere $5.35 billion.

During the month of June 2023, the total value of engineering exports to China experienced a decrease of 20% when compared to the previous year, amounting to US$ 184 million. On the other hand, engineering shipments to the WANA (West Asia and North Africa) region, CIS (Commonwealth of Independent States), and Northeast Asia region showed positive growth rates. Specifically, exports to WANA increased by 10.9%, to CIS by 161.2%, and to the Northeast Asia region by 0.5% between June 2022 and June 2023.

In general, India's engineering exports kept decreasing for the third consecutive month in June. They amounted to $8.53 billion, which is approximately 11% lower compared to the same month in the previous financial year. In total, the decline reached approximately 7.45%.

"The decline has primarily been caused by the metal industry, which has emerged as the biggest contributor. This can be attributed to the weakening of worldwide demand. The most recent reports have revealed that the global steel demand has further weakened due to reduced purchases from China's construction field," stated Arun Kumar Garodia, Chairman of EEPC India.

Garodia stated, "Equivalent worries such as the financial turmoil in the United States have similarly impacted the desire and cost of copper, aluminum, lead, and zinc. This is also evident in the export performance of India, which highlights a significant drop in exports to key trade partners such as the United States, European Union nations, and China. The situation is anticipated to deteriorate further due to the enactment of CBAM rules by the European Union. Furthermore, the debt crisis has resulted in reduced exports to South Asia, which consists of India's neighboring countries."

Apart from the shipment of iron and steel products, the exports of engineering goods experienced a decrease of 6.95% in June 2023 compared to the previous year, and a decline of 2.62% during the April-June period of 2023. This highlights that the decline in engineering exports is mainly influenced by the export of steel.

In June 2023, out of the 34 engineering panels or segments, 17 panels experienced a rise in exports compared to the previous year. Conversely, the other 17 panels observed a decrease in exports. Key engineering products such as iron and steel, iron and steel products, most non-ferrous products (excluding copper, nickel, and lead), industrial machinery and parts, two and three wheelers, auto components and parts, auto tyres, railway transport, and hand tools all experienced a decline in exports in June 2023 when compared to June 2022.

Expanding on patterns in the exportation of engineering goods, the Chairman of EEPC India, Garodia, stated that there has been a surge in India's exports to newly established Free Trade Agreement (FTA) collaborators such as UAE and Australia after the trade agreements were signed. Consequently, Garodia believes that in order for India to accomplish its objective of achieving $2 trillion in exports by 2030, it is imperative for the nation to establish more comprehensive FTAs with potential partners.

He observed, "All around the world, there is an increasing pattern of "friend-shoring" wherein countries are broadening their trade networks with political allies. Additionally, many businesses and economies are exploring a strategy known as China plus, as a result of the effects of the Covid pandemic. For India, this presents an opening to expand its options, particularly in non-conventional markets like Africa and Latin America. A way to achieve this is by actively seeking to establish comprehensive free trade agreements in these regions."

Exports of engineering goods from India experienced a decrease compared to the previous year for the seventh consecutive month in June. This decline also marked the third consecutive month of decrease and the first time the decline reached double digits during the current fiscal year. In June, the decline equated to 10.99%, whereas it was 4.13% in May.

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Last updated: 23rd July 2023, 4:57 PM Indian Standard Time