High trade figures underline emergence of trade as a key component of Indian economy, says a Global Trade Research Initiative report.
NEW DELHI: Even as India charts a trajectory of US$1 trillion exports each of goods and services by 2030, India’s foreign trade, including exports and imports of merchandise and services, is estimated to cross $1.6 trillion or 48% of India’s nominal GDP of US$3.4 trillion for the fiscal year ending March 2023. Despite sectoral weaknesses, high trade figures underline emergence of trade as an important component of Indian economy, says a report by the Global Trade Research Initiative.
Government data on Thursday projected India’s overall exports, combining goods and services, to scale new heights during FY 2022-23 (April-March) with a growth of 13.84% year-on-year to achieve a whopping US$770.18 billion worth of exports. Merchandise exports registered highest ever annual exports of US$447.46 billion with 6.03% growth during FY 2022-23 surpassing the previous fiscal exports of US$422.00 billion. The show stopper was services export, which catalysed the overall exports growth with a new record annual value of US$322.72 billion and growth of 26.79% over FY 2021-22.
As India’s domestic demand has remained steady amidst the global slump, overall imports in FY 2022-23 (April-March) is estimated to exhibit a growth of 17.38% over FY 2021-22 (April-March). “Higher growth rate in services exports, compared to merchandise exports, has improved overall performance of India’s exports,” says Ajay Srivastava, Founder of GTRI, a technology and trade research group. A comparison of compounded annual growth rate (CAGR) for past 5 years (FY18 to FY23) show that services exports grew with a higher CAGR of 9.8%) than merchandise exports (7.5%), Srivastava opines.
“The overall exports of over US$770 bn, amidst global headwinds, shows the resilience of the sector within the economy,” says A. Sakthivel, President of the Federation of Indian Export Organisations (FIEO). The achievement of US$447.47 billion in goods exports, according to Sakthivel, has been mainly on account of phenomenal growth in exports of electronic goods, petroleum products coupled with growth in agro and processed food, marine products, leather goods, apparel, drugs and pharmaceuticals and organic and inorganic chemicals. “Roughly 40% of the incremental GDP in 2022-23 was contributed by exports. We achieved aggregate exports of US$770 billion from about US$500 billion in 2020-21 with a growth of about 55%,” points out the FIEO president, who is confident of achieving the exports target of US$2 trillion by 2030.
The timely policy measures by the government helped the engineering sector withstand the external challenges to a great extent and achieve exports of US$107.04 billion in the financial year 2022-23, says Chairman of Engineering Export Promotion Council, India, Chairman Arun Kumar Garodia. “The impact of economic slowdown in major advanced economies has been visible in global trade. However, India has still managed to minimise the impact by taking several policy measures such as expanding the rupee trade, roll-back of export duty on specified steel products, and easing procedures,” noted Garodia.
The finer details of the trade data show China’s share in India’s merchandise imports declining to 13.79% in 2022-23 from 15.43% in 2021-22. A significant fall in share from China is seen in imports of fertilizers from 21.9% in 2021-22 (Apr-Feb) to 13.9% in 2022-23 (Apr-Feb) and this accounts for around half a billion fall in imports from China. However, the Commerce Ministry argument is that a decline in Chinese imports to India demonstrated improvement in the local manufacturing capacity and the electronics sector. The WTO had also revised its growth estimate for India in 2023 to 1.7% from its earlier estimate of 1% in September 2022.
The government is also now trying to increase India’s services exports from the non-IT sector by exploring its export potential in fintech, financial services sector, transport, accounting and legal services, according to Commerce Secretary Sunil Barthwal. At the same time, the government is looking to improve the manufacturing ecosystem by making exports competitive through a lower cost of production. There is also the intent to set realistic export targets based on the WTO trade growth forecast and the IMF forecast for growth rates of countries which import goods and services from India.
In that global context of growth, a study from the PHD Chamber of Commerce and Industry last week on “post pandemic recovered and unrecovered economies,” points out that in 2023, among the top 10 leading economies, 8 economies, will perform below their growth rates of pre pandemic level of 2019. Going ahead, the report suggests that “India is a bright spot in the global ecosystem, recovered significantly from -6.6% GDP growth in 2020 to 8.7% in 2021 and 6.8% in 2022 with projected growth rate of 6.1% in FY 2023. Economies like India and Japan have proven their resilience in consistently growing in positive trajectory during the last two years (2021, 2022) and for the current year 2023.”
Giving his outlook on exports for the next fiscal, Srivastava points out that the UNCTAD has forecast global trade in goods to increase by about 1%, while trade in services is expected to increase by about 3%. “The year 2023 will make most countries turn inward to stay safe from the global headwinds, not of their creation. Indian exports will be moderately impacted by weak global demand and recession in large economies but will gain as domestic economy looks resilient and exports from high growth sectors like electronics are picking up almost for the first time,” says Srivastava.
On a more positive note, despite the several shocks, 68 economies such as India, UAE, Saudi Arabia among others are growing consistently in the post pandemic period, the PHD report suggests. Thus India can remain optimistic of exports growth from these regions. Moreover, strengthening of India’s connectivity with global value chains will help to improve supply side bottlenecks and reduce costs of doing business. While the slowdown in the global economy and rising uncertainty will weigh on export and investment growth, the PHD report projects a more than 7% growth of exports in 2023-24.