Kolkata: Bank loans to exporters late January reached their highest level in the past 12 months, in line with renewed global demand for Indian goods despite the Red Sea crisis that has affected trade since late autumn due to piracy raids and question marks over maritime security.
Outstanding export credit for Indian banks was seen at Rs 20,489 crore at the end of January 26, rising 5% this financial year, data from Reserve Bank of India (RBI) showed. This was the highest since February last year.
“Export growth will be largely driven by global demand and as we do expect global growth to be steady, we can expect a recovery here. This will be reflected also in growth in export credit,” Bank of Baroda chief economist Madan Sabnavis said.
India’s merchandise exports surged 11.9% year-on-year in February to $41.4 billion – the fastest growth since June 2022 – after expanding 3.1% in January. With this, exports climbed for the third consecutive month, indicating sustained momentum, Crisil said.
“The near-term challenge to India’s exports due to the Red Sea crisis has been limited so far,” the rating company said.
The Red Sea crisis started on 19 October 2023, when Yemen’s Houthi rebels launched missiles and armed drones at cargo vessels operated by Israeli companies, demanding an end to the invasion of the Gaza Strip.
“How the crisis impacts prices when export contracts are renewed will be a key monitorable. Barring this hiccup, the recent healthy export momentum and forecasts by major multilateral organisations of better trade growth this year over last year are encouraging,” Crisil said.
The trend should also boost India’s current account, given the robust services trade surplus and healthy remittances.
Exports of drugs and pharmaceuticals rose 22.2% year-on-year in February against 6.8% in January. Exports of engineering goods climbed 15.9%, organic and inorganic chemicals 33% and readymade garments 4.9%. Exports of petroleum products showed a slight slowdown in growth as they rose 5.1% in February against 6.6% the previous month. Exports of gems and jewellery, however, contracted 11.3%.
