Indo-Kiwi bilateral trade remains modest and marginal

Dr Rahul Sen

Through India Trade Alliance

Auckland, December 17, 2017

New Zealand’s trade relationship with India has been strong and growing rapidly.

As at Year ended June 2017, India was the Seventh largest export destination and 11th largest import source for New Zealand’s total exports and imports of goods and services respectively.

India was the fifth largest destination for New Zealand’s commercial services exports after China, Australia, EU and US, and the Ninth largest import source for its commercial services imports.

Table 1 suggests that, as at year-end June 2017, India was New Zealand’s 11th largest trading partner based on total trade in goods and services, with a two-way total trade valued at $ 2.6 billion, out of which exports were worth $ 1.7 billion.

The Export Sector

New Zealand’s exports to India have been heavily concentrated in a few product categories. The top five goods exported from New Zealand to India as at Year-end June 2017 constituted 78.5% of New Zealand’s total exports to India.

The top commodity item of exports was Logs and Forestry products ($271 million), followed by Confidential items ($154 million), Wood Pulp ($45 million), Wool ($39 million), and Edible Fruit and Nuts ($34 million) (Table 2).

In terms of change in value of exports to India as at year-end March 2016, the largest increases were noted in Confidential Items (up by $70 million from a year ago); followed by Wood Pulp (up by $12 million) and Logs and Sugar & Sugar confectionery (both up by $2 million).

The largest decreases in export values during this period were noted in exports of Machinery Equipment and parts (down by $15 million), followed by Dairy Produce (down by $11 million compared to a year ago) and Metal Scraps including Iron and Steel ingots (down by $ 9 million).

Confidential Items change

In terms of percentage share contributions of New Zealand exports to India, the largest increases in year-end March 2017 compared to 2016 was observed in Confidential items (current share is 22% compared to 13% a year ago), followed by Wood Pulp (6.5% compared to 5% a year ago), and Sugars and Sugar Confectionary (1.4% compared to 1% a year ago).

The largest decreases in percentage contributions to New Zealand exports to India were noted in Logs (down by 2% compared to a year ago), followed by Dairy Produce and Metal Scrap (both down by about 1.6% compared to a year ago).

Logs and Forestry Products (HS-44) is currently the largest individually-valued commodity exported to India, with a value of $271 million, constituting a share of 6.4% of total Log and Forestry Exports of New Zealand, down by 0.7% compared to a year ago.

Confidential items have been the second largest value of exports to India constituting a share of 9.4% of total Confidential Items Exports of New Zealand, with an export value of $154 million as of year-end June 2017.

While this item is retrospectively reclassified to a more meaningful category, the respondent does not disclose the type of goods exported for competitive or confidentiality reasons. The share of this in total Confidential items exports of New Zealand was down by 2.3% compared to a year ago.

Export of Wool

Wool has been the third largest valued commodity worth $39 million sent to India as of year-end June 2017, increasing its share to 7.1% of total New Zealand exports of wool compared to 5% a year ago.

Edible Fruits and Nuts has been the fourth largest valued of exports to India as at Year- end June 2017, with $18 million worth of Kiwifruit exports and $15 million worth of exports of Apples, Pears and quinces. Notably, New Zealand’s exports of Kiwifruit to India increased by $5 million over the same period in 2017, making it one of the drivers of New Zealand’s increased Fruit exports to India in recent years.

The share of India in New Zealand’s total Kiwifruit exports increased to 1.1% from 0.8% a year ago.

Other notable exports sent to India as of year ended June 2017, worth more than $10 million of exports, have been Wood Pulp ($45 million), Metal Scrap including Steel ingots ($27 million), Aluminium ($28 million), and Hides and Skins ($15 million) respectively.

The Import Sector

New Zealand’s imports from India have not been that concentrated in a few product categories compared to its exports.

The top five goods imported by New Zealand from India as of year-end June 2017 constituted about 37% of New Zealand’s total imports from India.

The top commodity item of imports was Pharmaceuticals/Medications ($70 million), followed by Precious Metals and Gems ($59 million), Textiles and Motor Vehicles ($35 million each) and Non-Knitted Apparel and accessories ($27 million) (Table 3).

Machinery & Equipment

In terms of change in value of imports from India, the largest increases were noted in Machinery Equipment and Parts (up by $5 million from a year ago); followed by Organic Chemicals and Motor Vehicles (up by $4 million each).

The largest decreases in import values during this period were noted in imports of Copper and Articles thereof (down by $24 million compared to a year ago); followed by Pharmaceuticals (down by $ 6 million) and Electric Machinery and parts (down by $ 2 million).

In terms of percentage share contributions of New Zealand imports from India, the largest increases in year-end June 2017 compared to 2016 was observed in Machinery Equipment and Parts (current share is 4.1% compared to 3.2% a year ago), followed by Organic Chemicals (current share is 3 %, compared to 2.3% a year ago) and Motor Vehicles (5.7% compared to 5.1% a year ago).

The largest decreases in percentage contributions to New Zealand imports from India was noted in Copper and Articles thereof (down by about 3.8%, to 1.4% compared to 5.2% a year ago).

Pharmaceuticals and Medicines

Pharmaceuticals/Medicines is currently the largest individually valued commodity imported from India, with a value of $70 million, constituting a share of 5.4% of total Pharmaceuticals/Medicines imports of New Zealand.

Precious Metals and Gems has been the second largest value of imports from India constituting a share of 14.8% of total Imports of this product category into New Zealand. Textiles has been the third largest valued imported commodity with a value of $35 million, constituting a share of 10.2% of total Textile imports of New Zealand. Bed linen, table linen, toilet linen and kitchen linen constituted the bulk of New Zealand’s textile imports from India.

Motor Vehicles has been the fourth largest valued imports from India, although its share in New Zealand’s imports of Motor Vehicles is less than 0.5%.

Notable Imports

Other notable imports sourced from India in the past year, worth more than $10 million of imports, have been Non-Knitted Apparel ($27 million), Machinery Equipment and Parts ($25 million); Electrical Machinery and Parts & Plastics ($20 million each), Knitted Apparel and Articles made of Leather including Handbags etc. ($16 million each), Organic Chemicals ($18 million), Rubber and Articles thereof ($14 million) and Footwear and Parts, Iron and Steel, Carpets and Floor and Coverings (each worth $11 million), and Tanning & Dye extracts, Coffee, Tea and Spices & Furniture items (each worth $10 million) respectively.

It is also notable that compared to 2016, India’s share in New Zealand’s Copper and Article imports decreased by 13% as of year-end June 2017, while that in New Zealand’s Organic Chemicals, increased by 1.1%.

Commercial Services

Exports of Commercial Services decreased by $11 million from $1052 million to $1041 million over June 2016-2017. Imports of Commercial Services increased during the same period by $28 million to $258 million.

On the Export side, 97% of commercial services exports to India have been Travel- related, with 79% of total commercial services exports being accounted for by Education-related travel, whose share decreased by 1.3% in year-end June 2017 compared to a year ago.

Other Personal Travel-related services increased its share by 3% during this period.

All other service sectors, for which data is available, showed a decrease in the export volumes over this period.

High Education-Related Travel

This suggests that bilateral service exports expansion between the two countries has been led by education-related travel services in recent years, and continues to be heavily skewed in favour of it as of the second quarter of 2017.

It is notable that while Other Personal Travel-related service exports increased by $30 million, the same period saw a decline in Education-related Travel service exports by $23 million.

On the Import side, 62% of commercial services imports from India have been Travel-related, with 58% of total commercial services imports being accounted for by Other Personal Travel, whose share increased by 6.4% in year end June 2017 compared to a year ago.

Telecommunication and IT related services constituted 20% of total service imports sourced from India, followed by Other business services (12%).

While being low in value, Business Travel services reduced its share to 2.7% during this period compared to 3.5% a year ago.

Insurance & pension services, for which data is available, showed a decrease in the import volumes over this period. This suggests that bilateral service imports between the two countries has been largely led by personal travel services in recent years, and suggests an increased flow of tourism related travel between the two countries over the last year ended June 2017.

The latest data suggests that Other Personal-Travel related services has been the main driver of both exports and imports of commercial services between New Zealand and India.

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