Russia and Saudi Arabia are preventing a steep fall in exports of engineering goods from India. Thanks, at least partly, to these two countries, engineering goods exports this year are expected to exceed the achievement of last year—albeit slightly—even though the target for the current year is unlikely to be met.
In 2021-22, India exported $112.1 billion worth of engineering goods (all products made of any metal except precious metals); the number fell to $107.4 billion in 2022-23—largely due to the slowdown precipitated by the Russia-Ukraine war. (In 2022-23 India’s merchandise exports were worth $447 billion).
For 2023-24, the government set an optimistic target of $125 billion and a base case target of $122 billion for 2023-24, but this will almost certainly not be met. The achievement in April – December 2023 was $80 billion.
The Engineering Export Promotion Council (EEPC) expects exports in the current year to exceed last year’s achievement but not meet the target.
Russia and Saudi Arabia have bought more of India’s engineering goods this year. Thanks to the rupee-payment arrangement, India’s engineering exports to Russia might touch $1.3 billion, more than double that of last year.
Arun Kumar Garodia, Chairman, EEPC, said at a press conference here today that he “wouldn’t be surprised” if engineering exports to Russia touched $1.5 billion in 2023-24.
Exploring Arctic shipping route
Literature provided by EEPC says that India and Russia are “looking to expand the use of the Northern sea shipping route,” which runs along Russia’s northern coastline, passes through the Arctic Ocean, and is the shortest shipping route between East Asia and Europe.
The literature quotes the Russian government as saying that the cost of delivering a container from Vladivostok to India is one-third of the cost of shipping a container to Moscow.
As for Saudi Arabia, the country is building itself up in line with its Prime Minister, Mohammed bin Salman’s vision to convert the country to a modern nation. As such, it needs a lot of engineering goods. India’s engineering exports to the kingdom rose 70 per cent in April – December 2023 over the corresponding period of last year, touching $3.6 billion.
Garodia expects an uptick in exports to Saudi Arabia once the free trade agreement, which is under negotiations now, gets done.
It is learnt that to both Russia and Saudi Arabia, auto components and electrical machinery are among the leading export products. Garodia said that but for a sharp slowdown in the exports of steel and aluminium, engineering exports would have been much higher.
India targets engineering exports of $300 billion by 2030; the target of all merchandise exports is $1 trillion.