India remains a bright spot among strong global headwinds
Overall exports jumped about 20% in first seven months of FY23 at $445 billion
There are two ways to look at it. If one is determined to show a negative picture, the choice is obvious – India's merchandise exports in October 2022 fell 16.6% at $29.78 billion as compared to $35.73 in October 2021. But, trade also comprises services, one of the strengths of New India, which believes in its demographic dividend. And why to leave services when analysing trade performance? When both goods and services are combined, India’s total exports in October 2022 jumped over 4% at $58.36 billion at a time when the entire world, including advanced economies, are facing major headwinds.
Now, take the performance for the first seven months of the current financial year (2022-23). According to provisional official data, India’s merchandise (goods) exports was $263.35 billion in April-October 2022 compared to $233.98 billion in April-October 2021, an over 12.55% jump. Services exports also estimated to surge more than 31.4% from $138.01 billion in April-October 2021 to $181.39 billion in April-October 2022. (The latest official data also clarifies that for the services sector, it is an estimation for October 2022, which would be revised based on RBI’s subsequent release.)
The official data estimated overall exports (merchandise and services combined) in April-October 2022 at $444.74 billion, a growth of 19.56% over the same period last year. This is not a small achievement vis-à-vis the global trade environment.
HT on Thursday (November 17) reported that its merchandise exports to seven out of its 10 top trading partners – the US, the United Arab Emirates, China, Bangladesh, the UK, Saudi Arabia and Hong Kong – contracted year-on-year by 26%, 18%, 47.5%, 52.5%, 22%, 20% and 23.6%, respectively in October as their economies are slowing down due to massive global headwinds. India is indeed a bright spot, as its imports are expanding on contrary to other major economies because of strong domestic demands, particularly for raw materials. According to the latest official data, India’s overall imports in April-October 2022 are estimated to be $543.26 billion, exhibiting a positive growth of 33.8% over the same period last year.
India is certainly above the global average in all counts. It is certainly a bright spot at a time when major global economies are slowing down. This has been acknowledged by global institutions. According to a World Trade Organisation’s (WTO) projection, the global merchandise trade growth is expected to be 3.5% in 2022 and only 1% in 2023. Although India's share in global trade is very low, a global demand slump will hit India’s exports.
So far, India has performed well and going ahead, it will improve its performance because of two reasons – the top political leadership believes in converting challenges into opportunities and India’s current policy matrix is agile, flexible and well calibrated.
The government is responding to every emerging situation. When inflation became a key concern, the government on May 22 raised export duties on iron ore and steel products. As inflation softened a bit and came below 7% (CPI inflation in October was 6.77%), and merchandise exports fell, it took immediate corrective action. The Union finance ministry on Saturday withdrew export duties imposed six months ago on steel, iron ore and intermediaries.
The government is exploring new markets to expand its exports. Major advanced economies, including the United States have expressed that they consider India to become their reliable partner to ensure undisturbed supplies of goods and services. They learnt the hard way after facing perils of relying on a non-democratic, unreliable and opportunistic partner at a time when first Covid, and later the Ukraine war, have disrupted the global supply chain making food and fuel unaffordable to many developed countries.
That is why advanced economies want a trade deal with India. Free-trade agreements (FTAs) are under consideration with some major developed markets such as the UK, the European Union and Canada. Even as advanced economies are slowing down, strategy is to focus on regions with demand, such as North America, Latin America, West Asia and North Africa (WANA) countries.