Petro items pump up export share

India’s import basket is dominated by petroleum products, but the good news is that these items are fighting for space in the exports domain too. The export basket has undergone a major transformation in recent times. Petroleum products are gaining share in comparison to manufactured and primary goods.

In the past three years, petroleum products have emerged as the fastest growing export item, outpacing manufactured and primary items by a huge margin. An ETIG analysis has found that petroleum products accounted for 11.2% of the export bill in FY06, up from 5.5% in FY04.

In fact, petroleum products have grown 86.1% and 62.3% in the past two financial years. Most of the key petroleum products exported are naphtha, diesel, petrol, and small portions of furnace oil.

The increases in petroleum refinery capacity have been well above the domestic consumption requirement; it is this excess supply of petroleum refinery products that is contributing to higher export rates being seen. The strong global demand for Indian petroleum products is the highest from the Asian region, followed by Europe.

Just Singapore, the UAE, the Netherlands and the UK — account for about 40% of petroleum exports from India. In future, there could be a further rise in petroleum exports, especially with Reliance Industries deciding to cut down on retail sales of petroleum, and focus more on exports.

It’s premature to say whether petroleum exports would help in cutting the trade deficit created by the ever-expanding oil import. But it does look difficult: over the past three years, the trade deficit between petroleum export and import has ballooned, and is currently at Rs 1,43,660 crore.

Two key aspects of the exports basket were looked at — the growth recorded by different categories of goods and their overall share in India’s exports basket. Most of the goods were classified into four categories — primary products, manufactured products, petroleum products and other exports.

Primary products include agricultural & allied products, marine products, and ores and minerals. While manufactured products include leather goods, chemical and related goods, engineering goods, gems and jewellery, and textiles and textile products.

In terms of growth rates, manufactured exports still remain strong, but the magnitude of growth seen in petroleum products has reduced the share of manufacturing goods in Indian exports. Manufactured exports grew 18% in FY06 and 23.6% in FY05, while its share declined from 81.2% in FY04 to 76.4% in FY06.

Engineering goods, project goods and sports goods emerged as the fastest-growing manufactured export items in FY06. Europe proved to be the main destination for manufactured exports. However, exports of primary products have seen a slight improvement from previous years. Plantation crops have seen a pick-up and grew 10.3% on the back of coffee export.

Most of this demand for exports of agricultural products has come from the Asian (excluding Middle-East) region. Exports of ores & minerals have grown at 21% in FY06, much lower than the 73.1% growth seen in the previous year. In fact, close to 80% of ores and minerals exports was to the Asian markets, except the Middle-East.