India's electronics exports experienced a significant dip in September, hitting a 13-month low and declining by 3.7% compared to the previous year. This marked the first contraction in 31 months. Despite this slight downturn, steady imports contributed to widening the electronics trade deficit to an 18-month high, according to a recent analysis of trade data by Mint.

In September, the value of electronics exports was $1.9 billion, down from $2 billion the previous year. Meanwhile, electronics imports surged by 13.3% to reach $8.1 billion, resulting in a trade deficit of $6.1 billion.

Despite this setback, the electronics goods sector had been a standout performer in India's export basket for the fiscal year 2022-23, totalling $25.3 billion, a remarkable increase of 49% over the previous fiscal year. This growth occurred amid a challenging global economic environment, particularly due to macroeconomic challenges arising from the Russia-Ukraine war, which impacted India's overall exports.

During the period between April and September, electronics exports had grown by 28% compared to the previous year, with imports rising by 9%. However, experts attributed the decline in electronics exports to weakening global demand, caused by high inflation in key markets that reduced consumers' purchasing power. Global smartphone sales and personal computer sales both experienced significant declines, particularly in major export destinations like the US and Europe.

Within the electronics goods category, consumer electronics faced substantial challenges. Although the segment had performed well in the first nine months of 2022, it was unable to sustain its momentum. Consumer electronics exports experienced a continuous decline throughout 2023, falling by 70% from the previous year in August, according to the latest available data.

Experts also pointed out that the earlier surge in electronic goods exports was primarily driven by product assembly rather than genuine manufacturing efforts. Raghuram Rajan, former Governor of the Reserve Bank of India, highlighted that most of the work, apart from assembly, was done outside India. Ajay Sahai, the director-general of the Federation of Indian Export Organisations, noted a significant slump in consumer electronics exports, with a decline of over 50% year-on-year between April and August.

India's electronic goods exports encompass various components, including computer hardware, peripherals, electronic components, and medical and scientific instruments. The electronics sector has been a major beneficiary of the government's production-linked incentive scheme, receiving the majority of the incentives offered since its introduction in April 2020. This initiative has encouraged mobile equipment manufacturers to establish production units for exports.

Source: Mint