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India Ratings and Research in a report on analysis of industrial output and merchandise exports has stated that the Indian manufacturing sector, which received a fillip in FY22 due to export growth, is likely to be hit by a slump in foreign trade activity in FY23. The report suggested that the ‘exuberance’ witnessed in merchandise exports in FY22 helped the manufacturing segments. It added that ‘surge in merchandise exports helped the manufacturing sector in FY22, but was not broad-based and may not sustain in FY23’.

It further said the exports trend of FY22 may not sustain in FY23 due to the adverse impact of the Russian invasion of Ukraine, leading to recessionary concerns in the advanced economies, stringent COVID-19 control measures in China impacting production in various sub-sectors in India, and continued disruptions in global supply chain/trading sanctions imposed on Russia.

The report said India’s average annual merchandise exports during FY16-FY20 were $297.02 billion, having peaked at $330.08 billion in FY19. The same jumped to the highest-ever $421.89 billion in FY22. It said ‘since the pickup in merchandise exports has primarily been driven by the higher exports of manufactured goods, its spillover effect was expected to be visible in the higher capacity utilisation and an improvement in the industrial growth numbers in FY22’.

As per the agency, basic metals, textiles, pharmaceuticals and food products witnessed a robust rebound in export volumes in FY22 when compared to FY20 volume levels, suggesting that the production in these segments benefited from the buoyant export demand. On the other hand, the sectors which not only witnessed low growth in production levels but also low-to-moderate export volume growth in FY22 were railways locomotives, ships and aircraft, wearing apparel and leather products, among others.