Saturday, March 30, 2013

Steady rise of India's trade with Mexico

Yes.. Steady is the word to describe the growth of India's trade with Mexico, the second largest market of Latin America. The bilateral trade reached 6.29 billion dollars in 2012 from 4.15 billion in 2011,  2.9 bn in 2008 and 1.03 bn in 2003.

India's exports were 2.95 billion dollars in 2012 increasing by 24% from 2.38 bn in 2011. Engineering products topped the list of export items of India as usual. Exports of vehicles and parts were 466 million dollars followed by diesel- 439 m, organic chemicals-306 m , electrical and sound equipments-290 m, equipments and machinery-211 m and garments -150 m.

Crude oil imports in 2012 were 2.83 billion dollars (accounting for 88% of India's imports from Mexico) followed by electrical machinery and equipments - 242 m. India was the eighth largest export destination of Mexico in 2012. Reliance was the importer of Mexican crude oil, as in the past several years.

Although Brazil is the largest market of Latin America, Mexico is the trade leader in the region. Mexico's trade in 2012 was 741 billion dollars while Brasil's trade was 408 billion. Eighty percent of Mexico's exports go to USA and Canada, with which Mexico is bound in NAFTA.  Surprisingly USA accounted for only 49% of Mexico's imports. Mexico had a trade surplus of 89 billion dollars with USA in 2012.

Mexico had a massive trade imbalance with China in 2012 as usual. Mexican exports to China in 2012 were just 5.7 billion dollars while their imports were 57 billion.

Mexico's macroeconomic fundamentals are strong with healthy indicators such as 3.57% of inflation, interest rate of 4.5%, current account surplus and ample forex reserves. GDP growth in 2012 was 3.8% and it is expected to go up in 2013.The manufacturing sector is growing with a new vibrancy after having overcome the Chinese competition. Many American and  foreign companies have started production of manufactured goods in Mexico for the markets of USA and Canada. Mexico has become the fourth largest exporter of cars in the world after Germany, Japan and South Korea.

The assumption of Enrique Pena Nieto, the young, dynamic and visionary leader as the new President of Mexico augurs well for accelerated economic growth and prosperity. He has already implemented some reforms, which were considered as politically impossible even last year. He has shown courage and diplomacy to work with the opposition parties to bring about the reforms needed by the country.

Given the positive prospects of Mexico in the coming years, India's trade with Mexico could reach 10 billion dollars by 2015. 

Tuesday, March 26, 2013

India's Trade with Argentina increased marginally in 2012

The marginal increase is not at all bad given the fact that Argentina's global trade had decreased to 151.3 billion dollars in 2012 from 161.6 billion in 2011. Their imports reduced to 60.5 billion in 2012 from 64.6 bn in 2011. Their exports declined to 90.8 bn in 2012 from 97 bn in 2011.

The reduction in imports is mainly due to the stringent Argentine government restrictions on imports and foreign exchange. Importers are generally required to export an equivalent amount of what they import.The Import license and foreign exchange for imports are complicated/ delayed/denied arbitrarily by the authorities in a non-transparent manner. The government has taken recourse to these measures because of inadequate foreign exchange reserves to pay for imports and service the debts. The government is also doing this as part of their ideology to control the economy and business more and more.
This policy is likely to continue in 2013-14 ( till the next Presidential elections) too with minor variations.

Argentina's exports were down in 2012 due to the slow down of the economies of Brasil, China, and Europe. Exports to China had decreased by23% in 2012 from 2011.

India's trade with Argentina increased by 2.2% to 1837 million dollars in 2012 from 1774 million in 2011.
India's exports in 2012 were 573 million dollars as against 561 m in 2011. India's imports in 2012 were 1264 m while they were 1213 m in 2011.
India ranked 18th in both exports and imports in 2012 among the global trade partners of Argentina.

India's major exports in 2012 were: organic chemicals- 154 million dollars ( 27% of total exports), sound and image devices - 91 million dollars ( 16%), vehicles and parts-64 million, yarn and fabrics-45 m, garments-21 m, dyestuff- 17 m..
India's main imports in 2012 were: edible oil ( mostly soy oil)- 1111 million dollars ( 88%), minerals- 30 m, leather- 29 m, cotton- 10 m
Argentina is the main source of soy oil imports of India. The annual imports are around one billion dollars in recent years except in 2010 when it went up to 2 billion. The soy oil imports from Argentina fluctuates depending upon the international palm oil prices. However, given the ever-growing deficit of India  in edible oil production, India's imports of soy oil from Argentina will increase in the long term.

Argentina, which is the third largest market of Latin America after Brasil and Mexico, used to be the third largest destination for India's exports in the past. Not any longer.. It has slipped to the sixth position in 2012.  Colombia has replaced Argentina in the third rank while Peru and Chile have assumed fourth and fifth rankings.

Despite the current Argentine restrictions on imports, there is lot of scope to increase India's exports in the long term. Most of the macroeconomic fundamentals of the Argentine market are relatively strong and the economy is set on a course of sustainable growth.  The Indian exporters need to keep this positive long term perspective and work harder....

Wednesday, March 20, 2013

India's trade with Brasil crosses the 10 billion dollar mark

India's trade with Brasil reached 10.6 billion dollars in 2012 ( January to December), increasing by 15% from 9.2 bn $ in 2011. Twenty years back, in 1992 the bilateral trade was just 177 million dollars. Ten years back, in 2002, it was 1.2 billion dollars.
India's exports to Brasil declined in 2012 to 5.04 billion dollars from 6 billion in 2011.  
Forty one percent of India's exports ( 2.1 billion dollars) in 2012 were diesel exported by Reliance. The fall in India's exports in 2012 is due to the 33% decline in exports of diesel. 
The second biggest export was chemicals and pharmaceuticals which amounted to 697 million dollars. The third largest export item was polyester yarn – 225 million dollars. Autoparts exports were 106 million dollars. Apart from these items, the exports are well diversified with a wide range of  engineering products and industrial raw materials besides textiles and traditional items. Surprisingly coal was an important export – 99 million dollars.
India's imports from Brasil in 2012 were 5.58 billion dollars, increasing from 3.2 billion in 2011.  Crude oil ( imported by Reliance) accounted for 61% of the imports- 3.4 billion dollars. In fact, crude oil imports had increased by 100% in 2012 from 2011.
Sugar ( imported by Renuka Sugar ) was the second largest import-500 million dollars, accounting for 9 % of total imports.
Soya oil imports were 364 million dollars and Copper imports were 294 million dollars.
Imports of Embraer aircrafts amounted to 184 million dollars in 2012.
Of the total bilateral trade of 10.6 billion dollars Reliance alone accounted for 5.5 billion dollars with their import of crude oil and export of diesel.  In fact, this kind of exchange by Reliance has been the major factor for the significant growth in India- Brasil trade in recent years.

India is expected to increase its imports of crude oil in the coming years, given the increasing capacity of Brasil to produce more oil and the ever-increasing dependence of India on imported oil. India will also steadily buy more soy oil from Brasil to bridge the growing gap between domestic demand and production of edible oil. Copper imports will also go up in tune with the economic growth of India.

Renuka has regularly started importing sugar from Brasil in recent years. They imported for the Indian market in 2008-9 when India had a deficit in sugar production. In other years renuka imports raw sugar, refine it in their facilities in India and export it as white sugar to other countries.

The Indian exports of chemicals, pharmaceuticals, engineering and other manufactured products as well as industrial raw materials will continue to increase steadily with the intensification of export promotion by the Indian exporters who are targetting Brasil as a large and growing strategic market.The only exception is diesel export which will decline in the coming years as Brasil increases its refining capacity.

Bilateral trade with India accounted for two percent of Brasil' total trade of 408 billion dollars in 2012. It is significant to note that India has moved up as the seventh largest market for Brasil's exports.

The next milestone by 2016 should be 20 billion dollars..