Mumbai: India’s electronics exports hit a 13-month low in September, declining 3.7% from a year ago, marking a contraction for the first time in 31 months. Despite the modest contraction, steady imports widened the electronics trade deficit to an 18-month high, according to a Mint analysis of trade data released last week.
Electronics exports were valued at $1.9 billion during September, down from $2 billion a year ago. Meanwhile, imports of electronics surged by 13.3% to reach $8.1 billion, leading to a trade deficit of $6.1 billion.
In FY23, electronics goods exports emerged as a standout performer for India’s export basket, totalling $25.3 billion, up 49% over FY22, even during a year when overall exports grew just 6.7% as global macroeconomic headwinds stemming from the Russia-Ukraine war impacted India’s broader exports.
In 2022-23, the electronic goods sector climbed to the sixth position among all goods export categories, surpassing ready-made garments for the first time. Besides, it secured the fourth spot in manufacturing goods segment, according to an earlier Mint analysis.
Between April and September, electronics exports grew 28% from a year ago, while imports rose 9%. In August, exports increased 27%.
Experts said slackening demand globally, owing to high inflation in key markets eating into the purchasing power of consumers, has led to a cutback in discretionary spending. This, in turn, dampened India’s electronics exports. Global smartphone sales fell 8% from a year ago during July-September, marking the ninth consecutive quarter of decline, according to a report by Counterpoint Research on Tuesday. Personal computer sales also plunged 9% during the period, it added.
The sales decline was due to slower-than-expected recovery in consumer demand in the US and Europe, the major export destinations for electronic goods from India.
Within electronics goods, export of consumer electronics faced severe challenges. While the segment performed well during the first nine months of 2022, it could not sustain the momentum. Consumer electronic goods exports have contracted for all months in 2023, falling by 70% from a year earlier in August, which is the latest disaggregated data.
That said, experts have also warned that the earlier surge in electronic goods was primarily driven by product assembly instead of a genuine push in manufacturing. Former Reserve Bank of India governor Raghuram Rajan had said that “very little apart from assembly is done in India, though manufacturers claim they intend to do more in the future. So, India still imports much of what goes into the mobile phone.”
Ajay Sahai, director general of Federation of Indian Export Organizations, said: “In consumer electronics, a declining trend has been visible for some time now. Between April and August, a significant slump was mainly seen in consumer electronics exports as exports in this sub-segment have fallen over 50% y-o-y.”
Components of India’s electronic goods exports include computer hardware, peripherals, electronic components, and medical and scientific instruments. Electronics has also been the biggest beneficiary of the Centre’s production-linked incentive scheme, getting the lion’s share of incentives offered. It was notified in April 2020 , and helped mobile equipment manufacturers to set up production units for exports.
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