Indian export growth is on a stable momentum; what it means for retail investors

Despite global headwinds, Indian exports are rising due to a variety of factors such as the production-linked incentives scheme (PLI), multi-year high commodity and food prices and various other factors. According to the recent data released by the ministry of commerce, India's merchandise exports in September stood at $35.45 billion, up 4.82% as compared to USD 33.81 billion in September 2021. While imports rose to $61.16 billion as against $56.29 billion in the corresponding month of last year, an increase of 8.66%.

The trade deficit in September widened to $25.71 billion from $22.47 billion, an increase of 14.41% from the same month of last year. However, sequentially, the deficit eased from $27.98 billion in August. In July 2022, India's trade deficit touched a record high of $30 billion.

The data also shows that between April and September 2022–23, exports increased by 16.96% to $231.88 billion, from $198.25 billion in the same month of last year.

For the first time in FY22, the country's exports touched the $420 billion mark. The previous best was $331.02 billion, which was achieved in 2018-19. In FY23, exports may overtake the previous fiscal target as exports have already crossed $230 billion in H1FY23, said SBI in its Ecowrap report.

The government of India's consistent and concerted endeavours to usher in reforms to boost agricultural exports have been highly fruitful and are currently showing results. India’s agricultural exports rose remarkably despite COVID-19 and crossed the $50 billion mark in FY22. Efforts are being made to expand India’s agri-export basket and promote the export of products unique to India, said the report.

The government of India is on the right path for targeting massive export growth with the launch of a new logistics policy and the One District One Product – District Export Hub (ODOP-DEH) initiative.

The report said that ODOP-DEH is a transformational step towards realizing the true potential of a district, fueling economic growth, generating employment and rural entrepreneurship, aimed at fostering balanced regional development across all districts of the country enabling holistic socio-economic growth across all regions, enabling MSMEs, farmers and small industries to get the benefit of export opportunities in the overseas markets and shifting focus on District led Export Growth for self-sufficiency and self-reliance.

With the introduction of ODOP-DEH in FY20, exports have seen a tremendous increase in nearly all states. Exports of Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Madhya Pradesh, Maharashtra, Punjab, Rajasthan, Sikkim, Telangana, Uttar Pradesh and West Bengal have increased more than thrice since the introduction of the ODOP-DEH initiative, the report highlighted.

India should capitalise on the "China+1" strategy, along with avoiding protectionism and corrections of inverted duty structures for boosting the export competitiveness of India’s Economy.

The new logistics policy aims at reducing logistics costs in India, improving the Logistics Performance Index ranking to be among the top 25 countries by 2030, and creating a data-driven decision support mechanism, according to the report.

What increased exports imply for Retail investors

When Russia invaded Ukraine in February, the initial panic was felt primarily in crude oil and financial markets. However, as the battle progressed, the world saw the real impact on the back of war clouds. It caused an increase in food prices and also caused supply chain disruptions.

Given that India is among the top producers of rice, wheat, and sugar, the geopolitical crisis has benefited the country's agricultural exports. Due to a limited global supply, rice prices have increased rapidly, and at the same time, demand for Indian rice on the international market has shot up.

Indian rice stocks, including KRBL, LT Foods, and Chaman Lal Setia Exports, are the primary beneficiaries of rice exports, and these companies are also the leading rice exporters in the world.

Since the beginning of March, KRBL shares have delivered a multi-bagger return of 105.57%, LT foods have returned 91.38%, and Chaman Lal Setia Exports has delivered 23% returns to shareholders.

Similarly, Indian sugar companies profited from rising sugar prices as exports from the world's largest sugar producer Brazil have contracted. India's sugar exports jumped 57 per cent to 109.8 lakh tonnes during the 2021-22 marketing year ending September, ET reported.

Indian Sugar stocks have outperformed the Nifty since March. Shree Renuka Sugars was the biggest gainer, increasing 93% from ₹32.90 to ₹63.50. The stock has risen 160.25 per cent from its 52-week low of Rs. 24.40. During the same period, Ugar Sugar Works stock increased by 65.46%. EID Parry and Sakthi Sugars are two other stocks that have gained 53% and 48.45%, respectively.

Likewise, stocks in the speciality chemicals sector also spiked in recent months due to factors supported by the depreciating rupee, supply interruptions, the China+1 strategy, and the rise in global demand.

According to the IBEF report, Indian speciality companies are witnessing interest from strategic investors led by Japan, Korea, and Thailand, as they seek to diversify their supply chains from China.

China constitutes about 20% of the global Specialty chemical industry ($800 billion), and even a 5% shift in market share from China to India can translate to an $8-billion opportunity for the Indian Specialty chemical companies, said domestic brokerage firm, Sharekhan.

Stocks in the speciality chemicals sector have also delivered multi-bagger returns. Fine Organic share price has risen by nearly 116.60 per cent in the last year, from ₹3,420 to the current level of ₹7,408. Similarly, Gujarat Fluorochemicals and Navin Fluorine increased by 88.68% and 18%, respectively.

Exports matter a lot

The amount of merchandise exported by a country is critical to revenue generation and economic growth. Several economists have pointed out that increased exports help nations grow rapidly in terms of GDP and domestic output.

Exports are extremely important for the overall growth of a country’s economy and also for global trade. In this era of globalisation, most leading economies in the world are also major exporters. Exports provide millions of small business owners and corporate firms with access to a larger global market to sell their products.

For instance, China is the world's largest exporter of goods, followed by the United States, Germany, and Japan. India is also climbing the ranks as it expands its global export footprint. India is currently one of the world's top agricultural exporters.

It is worth noting that exports not only help governments generate additional revenue but also help exporters — both small and large businesses — expand operations due to higher profits.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.