The UAE is likely to remain top export destination for India till 2030, and China is forecast to emerge as the second largest export market, displacing the US.
India, which is on track to become the world’s fifth-largest exporter of goods by 2030 in value terms, is forecast to re-emerge as the top export and import destination of the UAE by the same timeline, the latest HSBC Trade Forecast said.
In addition to India, the fastest-growing export markets for the UAE will be China, Malaysia, Turkey — each of which will see the fastest growth rates between 2017 and 2030, the bank said.
Asia and Turkey will also remain the most important trade partners of the UAE in terms of imports. Import growth will be fastest for goods originating from China, India, Turkey and Vietnam, the forecast said.
“The UAE is likely to remain top export destination for India till 2030, and China is forecast to emerge as the second largest export market, displacing the US,” said the report. India’s two-way trade with the UAE, its No.1 trading partner for the past several years in a row, suffered a dramatic setback with a sharp 21 per cent decline in the 2013-14 financial year compared to the previous year following India government’s move to raise gold import duty to 10 per cent from two per cent.
According to the Indian Ambassador to the UeAE T.P. Seetharam, a $9 billion decline in gold imports from the UAE in 2013-14 led to a sharp fall in bilateral trade to $59.6 billion from a record high of $75.4 billion in 2012-13 as Indian exports dropped 16 per cent to $30.49 billion from $36.3 billion while imports from the UAE plummeted 25 per cent to $29 billion from $39 billion.
A decline of $15.8 billion in bilateral trade is the biggest percentage drop in the UAE-India bilateral trade, according to India’s Ministry of Commerce. Consequently, India has lost its position as the number one trading partner of the UAE, and is now placed behind China ($65.8 billion) and the US ($61.4 billion).
Tim Evans, regional head of Global Trade and Receivables Finance, said sectors such as infrastructure and construction, tourism, retail and government investments in technology would continue to be the main drivers of the UAE’s economy going forward.
“With that said, we still expect petroleum products to remain both the largest category of total exports and the largest contributor to total export growth up to 2030.”
“It will account for over 40 per cent of total export growth over this forecast horizon. So it is no surprise to see energy hungry countries such as India and China on top of the UAE’s export list.”
Evans said UAE importers would continue to have their main focus on Asia and intra-regional trade as well. It will be these markets that prove to be the fastest growing corridors for the country’s long term import growth. “We are already seeing this trend in the short term as the Trade Confidence Index reveals that 65 per cent of businesses surveyed reported current trade activity with these regions while 75 per cent believe that Asia or Mena will have the best opportunities of growth over the next six months.”
According to the Trade Confidence Index, a survey of importers and traders from the SME segment and issued as part of the HSBC Trade Forecast report, the UAE remains firmly positive about increasing trade activity over the next six months. The country ranked third out of the 23 countries surveyed. Some 47 per cent of respondents believe trading volumes will increase “slightly” over the next six months, and another 16 per cent believe the increase in trade volumes will be “significant”. An increase in demand — either globally or in key markets — is cited as the basis for this increase by around 45 per cent of respondents.
Globally, world trade is set to resume its growth trajectory in 2016, presenting fresh opportunities for businesses that have positioned themselves to benefit. Exporters and importers in cyclical sectors, such as transport equipment and metals, will be the first beneficiaries as the pace of growth in cross-border commerce recovers to eight per cent in 2016 from just 2.5 per cent last year. Looking out to 2030, the bank’s forecast projects that global merchandise trade will more than triple as astute companies capitalise on increasing productivity and consumer wealth in the emerging markets.
Increasingly robust economic conditions in the US and the UK, along with a gradual rebound in the Eurozone, will give many international businesses a platform on which to build during 2015.
“By 2030, China is expected to increase its overseas shipments five-fold as it strengthens commercial ties to emerging Asia, the Middle East and North Africa. . India, meanwhile, is likely to be the world’s fastest-growing exporter from 2014 to 2030, and has the potential to move from the 14th largest exporter of goods by value to the world’s fifth largest,” HSBC said.
India has the potential to become an export hub for autos and it is well-placed to further develop its textile industry, the HSBC report said.
This is despite the fact that the country’s near-term growth prospects remain lacklustre, with the economy likely to expand by 5.3 per cent in 2014 and 6.3 per cent in 2015 — well below the rapid growth rate of around 8 per cent a year in 2001-11.
“Despite struggling with a number of structural impediments to growth, prospects for medium-term growth in trade remain strong,” the HSBC report said.
India’s Trade Confidence Index increased from 126 in the second half of 2013 to 137 in the first half of 2014. In the near term, respondents see Europe as the most promising trading destination, pushing Asia into second position.
“The economic potential for India remains strong, with the growing population and rapidly expanding middle class - it presents opportunities for business. India is forecast to emerge as the world’s largest middle class market, surpassing both China and US,” HSBC India managing director and head of commercial banking, Sandeep Uppal said.
Sector-wise, pharmaceuticals, transport equipment and textiles will help India accelerate overall export growth. By 2021- 30, pharmaceuticals exports are likely to emerge as one of the top 10 contributors to total export growth.The domestic pharmaceuticals sector is relatively advanced and in a position to compete globally, the report said.
