India’s engineering exports soar to an all-time high of $116.67 billion in FY 2024–25

Observation: Excluding the export of iron and steel, engineering exports recorded a marginaly lower year-on-year growth in November 2024 as growth in exports of Iron and Steel was higher at 16.45 percent than that of overall engineering at 13.50 percent in the month. On a cumulative basis however, overall engineering exports recorded lower growth than that of excluding Iron and Steel as exports of the latter still declined by 17.65 percent during April-November 2024-25.

Source : DGCI&S, Govt. of India

The following table depicts region wise India’s engineering exports for April-November 2024 as compared to April-November 2023.

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Reasons for Decline (As per April-November 2024-25):

• Iron and Steel :- Insights: 

a)During April-November 2024-25, India’s exports of Iron and Steel deteriorated by 18% vis-à-vis same period last fiscal, while Products of Iron and Steel witnessed growth for a)the second consecutive month to the extent of 1% during the same period, after continuous decline for many months.

b)b)Indian exports of HRC continued to remain low because of competition from other sources in regions like Southeast Asia and the Middle East. The increase in export offers failed to incite buying interest amongst overseas and domestic buyers. Indian primary steel producers raised their list prices by INR 1,000/t for hot-rolled coils (HRC) in November. Some mills offered price support of around INR 1,250/t towards end-November considering the lacklustre market scenario.

c)c)The gap between CRC and HRC stood at around INR 7,100/t in November as compared with INR 7,500/t in October. Concerned about the lacklustre market sentiments, some mills offered price support of around INR 1,000-1,500/t in their list prices towards end-November.

d)d)Overall Outlook: India ending 2024 as a net steel importer with 10 mnt of imports and 8 mnt of exports, after a 9 year gap. China’s dumping steel across the world at highly predatory price levels. The dumping is an off-shoot of several factors. Volumes from China increased just ahead of the expiry of some of the Bureau of Indian Standards (BIS) licences given to mills/exporters. At that juncture, the Indian government had imposed a series of safeguard measures to stem the imports flow in efforts to protect the Indian steel mills. MSMEs were already struggling with high domestic steel prices, which remained at a premium compared to imported steel. This price disparity increased production costs and squeezed profit margins for small and medium-sized enterprises.

e)e)Additionally, the Karnataka (Mineral Rights and Mineral Bearing Land) Tax Bill, 2024 introduced new taxes on mineral-bearing land and mineral rights, significantly increasing production costs for iron ore. This bill raised the cost of iron ore production for private companies, reducing the competitiveness of Indian steelmakers and impacting their export capabilities.

• Non- Ferrous Sector (Copper, Zinc, Nickel and Lead) 

a)As per the London metal Exchange most of the non-ferrous metals traded on the exchange lost value this November barring aluminium

b)Tin showed the biggest decline in value at 7.6 percent, followed by nickel, which lost 6.3 percent in value in November. Copper joined the list of beleaguered metals by dropping 4.9 percent of its value last month. Zinc (-3.3 percent) and lead (-2.3 percent) also declined in price.

c)In case of copper there has been an increase in domestic demand especially the EV sector: The Ministry of Mines projects that the demand for copper in India, particularly from the EV sector, will increase by 1.7 million tonnes by 2027. The per capita copper consumption in India is also expected to rise from the current level of 0.6 kg to 1 kg in the coming years.

d)Closure of Vedanta's Sterlite copper plant has also impacted the domestic supply of copper

Source : DGCI&S

The table below indicates the exports from top Indian states. It is evident from the table that almost 94.6 % of India’s exports is contributed by the listed 12 states. Within this almost 56.9 percent of exports is done by Maharashtra, Tamil Nadu and Gujarat together.

• Top 12 states constitute over 94.6 % of India’s engineering Exports. Karnataka deteriorated in its performance dropping down to 5th position, Telengana moved up the order to 4th position, Odisha maintaining its 6th position, while Daman and Diu moved up to 12th position and Haryana moved further down to 13th position during the fiscal April-November 2024-25 compared to the same period last fiscal.
• Major negative growth witnessed in states like Maharashtra, Odisha, Andhra Pradesh, Rajasthan and Daman and Diu during April-Nov 2024-25 compared to the same period last fiscal.
• Maharashtra being the highest state in terms of Engineering Goods exports is leading by US$ 2981.6 million from Tamil Nadu(Second Highest State) for the period of April-Nov 2024-25

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Engineering forms a considerable part of the broader manufacturing sector and the share of engineering production in overall manufacturing output is quite significant. As exports generally come from what is produced within a country, some correlation between manufacturing production growth and engineering export growth should exist. We briefly look at the trend in manufacturing growth as also engineering export growth to see if they move in tandem. It may be mentioned that manufacturing has 77.63% weightage in India’s industrial production.

Engineering export growth and manufacturing output growth moved in the same direction in as many as nine out of twelve months in each of the fiscal years 2019-20 and 2020-21. During fiscal 2021-22, engineering export growth and manufacturing growth moved in the same direction in seven out of twelve months while in each of fiscal 2022-23 and 2023-24, as many as 10 out of 12 months saw engineering exports and manufacturing output moved in the same direction.

The first two month of fiscal 2024-25 also saw manufacturing output growth and engineering exports growth moving in the same direction. April 2024 saw engineering exports declined from a growth in Mar 2024 and manufacturing output growth decelerated. The month of May 2024 witnessed just the opposite. Engineering exports bounced back to growth path and manufacturing output growth accelerated. Then June, July and August 2024 however saw both moved in the opposite direction. June and August 2024 saw higher engineering export growth but lower manufacturing growth in comparison to the previous month while July 2024 just witnessed the reverse. September and October 2024 again saw both moving in the same direction by securing acceleration in growth.

The link between these two may not be established on a monthly basis, but a positive correlation may be seen if medium to long term trend is considered.