Indian exports are defying a firm rupee, riding a rise in global growth with a surge in shipments of the kind of high-tech goods every nation covets.
Exports rose to a six year high in March and, for now, that upward trend is tipped to continue as the world economy chugs along and foreign direct investment boosts productivity and stabilizes the economy, said Pranjul Bhandari, chief India economist for HSBC Holding Plc.
“India’s merchandise exports have risen sharply over the last two months,” Bhandari wrote. “We find that the rise is coming from high-tech goods, particularly engineering goods and chemicals as well as medium-tech goods."
The improving performance comes despite the rupee's gain, which is up 5.1 percent this year and among the top-performing in Asia. Late last month, as the rupee hit a 20-month high, the Federation of Indian Export Organisation, said the currency’s appreciation is posing a challenge to competitiveness.
For sure, the rupee isn't the only challenge. If Asia’s third-largest economy is to meet its trading potential the government will need to clear out bottlenecks and spend more on human capital according to Bhandari. Some of those challenges include shortages of cotton production for textiles, a lack of irrigation for agriculture and more investment for engineering goods she said.
Rising trade protectionism world could also hurt demand for Indian exports, especially from the booming technology sector. Exports here total about $110 billion and contribute about 9 percent to India’s gross domestic product.
Still, for now at least, Indian exports are humming along with a broader rise in Asian trade, underpinned by demand from U.S. and European shoppers. That's a boon for the world's fastest growing major economy.