MUMBAI, March 13, 2013 /PRNewswire/ --
India's Participation in Intra-Asian Trade is Forecast to be a Major Driver of Regional Trade Growth as the Asian Economy Recovers Faster Than That of Europe or the US
The sectoral composition of India's goods exports will change over time as the country moves up the value chain into higher-tech sectors such as transport equipment, chemicals and industrial machinery, as per the latest HSBC Trade Forecast report. However, the lower value-added sectors like wood and textile manufacture, which employs a large part of India's unskilled workforce, will continue to generate a significant portion of export revenue.
The report further states, India is not as trade-oriented as many other emerging Asian economies, partly due to its large domestic market, however, exports have risen substantially as a share of Indian GDP over the past decade. While the slowdown in growth to 6.5% in FY2012 from 8.4% in FY2011 was primarily domestically driven, the slowdown in exports had some impact as well. The economy is expected to have slowed further in FY2013, but is expected to gradually recover in FY2014, with trade supporting growth towards the latter half of the year. It further forecasts merchandise exports to grow at an impressive average annual pace of 17% over the period 2013-15 and by 15% a year during 2016-20.
Key market overview from the HSBC Trade Forecast:
- India's largest single export relationship is with UAE, accounting for around 15% of total exports. A key reason for these close trade links is their geographical proximity, as well as the political-cultural links between the two countries. These links mean that the UAE's dominance as an export market is expected to endure out to 2030.
- The US is currently a very important market, but is forecast to decline in relative significance as intra-Asian trade proves a more dynamic opportunity over the next two decades. China, Hong Kong and Vietnam, in particular, are expected to considerably increase their share in India's exports.
- Australia's main export markets are in Asia, and this trend will continue, led by China, Japan, Korea and India. Australia is well placed to meet the growth in demand for minerals and food in Asia with exports to Asia (excluding Japan) expected to grow at over twice the pace of exports to other regions until 2015.
- Export growth in Bangladesh is expected to pick up in 2013/14 in line with the anticipated global recovery, helping to lift GDP growth to 6.6%.
- Hong Kong's trade flows are dominated by its bilateral relationship with China, which takes over 50% of Hong Kong's total exports. Hong Kong's position as a trade hub within the East Asian economy means that signature East Asian durable manufactures, notably industrial machinery and ICT equipment, are of principal importance to Hong Kong's merchandise trade, and will continue to underpin growth out to 2030.
- Continued momentum in Indonesia's domestic demand is expected to propel the economy to grow by 6.1% this year, unchanged from 2012. With its close proximity, Emerging Asia will be Indonesia's fastest growing source of trade until 2030.
- Malaysia's GDP is forecast to slow to about 5% in 2013-2014, supported by robust domestic demand that has been led by very strong construction investment and consumer spending.
- GDP growth in Singapore slowed sharply in 2012 with global headwinds holding down trade and leading to a contraction in the manufacturing sector. But there have been promising signs at the start of 2013, and as a result, GDP growth and trade in Singapore are forecast to pick up pace as the manufacturing sector recovers strongly.
- Vietnam maintained double-digit export growth in 2012, with export values in US dollar terms growing an estimated 20%. Vietnam will also be an increasingly large importer, both of capital goods to meet its infrastructure needs and of consumer goods to meet the needs of its rapidly expanding consumer market.
Sandeep Uppal, Managing Director and Head, Commercial Banking, HSBC India said: "As the Asian economy recovers faster than that of Europe or the US, India's participation in intra-Asian trade is forecast to be a major driver of regional trade growth. India's exports are expected to accelerate in the coming years as the country moves up the value chain into higher sectors such as transport equipment, chemicals and industrial machinery."
Sectors to watch in India:
Natural resource-based sectors are currently of primary importance, including petrol products such as fuels, industrial lubricants and bitumen, and mineral manufactures like cement, brick, and glass products.
Mineral manufactures will continue to provide a strong and steady source of growth, supplying construction materials to the developing countries of the region, and absorbing India's large unskilled workforce. This sector is expected to contribute around 15% of India's export growth in the decade to 2030.
However, India is also forecast to begin to move into higher-value and higher-tech sectors as the workforce becomes more skilled. In particular, the country's passenger car and commercial vehicle manufacturing industry is expected to be a major driver of exports, helping the transport equipment sector to contribute around 15% of total export growth in the decade to 2030. Chemicals and industrial machinery are also seen providing a strong and steady source of export revenues, with each contributing around 7-9% of growth out to 2030 as they gradually account for a higher share of trade.
About the HSBC Trade Forecast - Modelled by Oxford Economics
Oxford Economics has tailored a unique service for HSBC which forecasts bilateral trade for total exports/imports of goods, based on HSBC's own analysis and forecasts of the world economy to generate a full bilateral set of trade flows for total imports and exports of goods, and balances between 180 pairs of countries.
Oxford Economics produces a global report for HSBC, plus regional reports and country specific reports on the following 25 countries: Hong Kong, China, Australia, Indonesia, Malaysia, India, Singapore, Vietnam, Bangladesh, Canada, USA, Brazil, Mexico, Argentina, UK, France, Turkey, Germany, Poland, Ireland, UAE, Saudi Arabia, Korea, Japan and Egypt.
Oxford Economics employs a global modelling framework that ensures full consistency between all economies, in part driven by trade linkages. The forecasts take into account factors such as the rate of demand growth in the destination market and the exporter's competitiveness. Exports, imports and trade balances are identified, with both historical estimates and forecasts for the periods 2013-15, 2016-20 and 2021-30.
Oxford Economics - formerly Oxford Economic Forecasting - was founded in 1981 to provide independent forecasting and analysis tailored to the needs of economists and planners in government and business. It is now one of the world's leading providers of economic analysis, advice and models, with over 500 clients. Oxford Economics commands a high degree of professional and technical expertise, both in its own staff of over 70 professionals based in Oxford, London, Belfast, Paris, the UAE, Singapore, Philadelphia and New York, and through its close links with Oxford University and a range of partner institutions in Europe and the US.
About HSBC India
The Hongkong and Shanghai Banking Corporation Limited in India offers a full range of banking and financial services to about 1 million customers through its 50 branches and 140 ATMs across 29 cities.
HSBC is one of India's leading financial services groups, with over 30,000 employees in its banking, investment banking and capital markets, asset management, insurance broking, insurance, software development and global resourcing operations in the country. It is a leading custodian in India. Nearly 6% of India's exports and imports pass through HSBC India's banking channels. The asset management business in India is one of the leading players in the industry. The Bank is at the forefront in arranging deals for Indian companies investing overseas and foreign investments into the country. It has a fully enabled and established insurance advisory of international standards. It is one of the leading players in domestic and export factoring. With its extensive reach across Asia, the Americas and Europe, HSBC has the capacity to offer complete banking and financial solutions to India's burgeoning economy. In 2008, it acquired a majority stake in IL&FS Investsmart (now renamed HSBC InvestDirect) that has enabled it to offer retail brokerage services to its customer across a wider geography. It has also formed a joint venture life insurance company with Canara Bank and Oriental Bank of Commerce.
HSBC's network of branches is located at Ahmedabad, Bangalore, Chandigarh, Chennai, Coimbatore, Gurgaon, Guwahati, Hyderabad, Indore, Jaipur, Jodhpur, Kochi, Kolkata, Ludhiana, Lucknow, Mumbai, Mysore, Nagpur, Noida, New Delhi, Nasik, Patna, Pune, Raipur, Surat, Trivandrum, Thane, Vadodara and Visakhapatnam.
The Bank is the founding and a principal member of the HSBC Group which, with an international network covering 6900 offices in 80 countries and territories and assets of US$2,692bn at 31 December 2012, is one of the world's largest banking and financial services organisations.
About HSBC Holdings plc
HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. The Group serves customers worldwide from around 6,600 offices in over 81 countries and territories in Europe, the Asia-Pacific region, North and Latin America, and the Middle East and North Africa. With assets of US$2,692bn at 31 December 2012, the HSBC Group is one of the world's largest banking and financial services organisations.
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SOURCE The Hongkong and Shanghai Banking Corporation Ltd