Context:
India’s annual goods exports crossed the $400-billion mark for the first time ever, the government announced, buoyed by an increase in shipments of merchandise, including engineering products, apparel and garments, gems and jewellery and petroleum products.
The government is confident of clocking $410 billion of exports by March 31, as India has been shipping out goods worth more than $1 billion a day.
Marking the “first time ever” development, Prime Minister congratulated the manufacturers, farmers and weavers for achieving this target.
Commerce and Industry Minister asserted that neither the COVID-19 pandemic nor the global uncertainties following the Ukraine crisis had affected India’s ability to reach its export goals.
Engineering And Petroleum Products Gain:
- Engineering goods remained India’s largest export item, contributing 26.9% of all merchandise exports in the first 11 months of FY22.
- Exports of engineering goods rose 32% upto February 2022 on an annual basis. Compared to the pre-pandemic year of FY20, exports in this category are up 28%.
- Exports of petroleum products saw the sharpest rise at 114% from FY21, led by a rise in crude oil prices. Compared to FY20, they registered a rise of 30%.
- Electronic goods, organic and inorganic chemicals also saw a rise in exports, even though their share in total exports remained the same as in FY20.
- Gems and jewellery exports and readymade garment shipments lost share compared to the pre-pandemic year, while rice — India’s single largest agricultural export — made up for 2.3% of all merchandise exports.
- The rise in petroleum products was led by demand and higher prices towards the second half of the year.
- Agricultural goods exports continued to benefit from strong domestic production and a surplus in key commodities like rice and wheat. This was not the case in other parts of the world.
Milestone, says PM Modi:
- India set an ambitious target of $400 billion of goods exports and achieves this target for the first time ever. This is a key milestone in our Aatmanirbhar Bharat journey.
- Exports had reached $331.02 billion in the pre-pandemic fiscal year of 2018-19.
- Shipments have so far increased by $25.19 billion during the month of March and by March 31, the total figure is expected to be $410 billion.
- Commenting on the development, Commerce ministry said that the boost in the exports was likely to bolster India’s position in the ongoing negotiations for Free Trade Agreements (FTAs) with several trade partners.
- Noting that the agriculture sector too had recorded its highest-ever export during 2021-22 with the help of export of “rice, marine products, wheat, spices and sugar”, Government termed the development a “Made in India blockbuster” and a “collective show of strength”.
Collaborative effort:
- The Commerce ministry attributed the success to the coordination between the government, the industry and various Ministries, including the diplomatic arm.
- Government said Indian embassies and envoys had explored new opportunities across the world to help achieve the target.
- “We broke every silo within the government… our missions abroad, and collectively everybody worked for a common purpose,” said Mr. Goyal who thanked banks, insurance companies and India’s diplomats.
- Crossing $400 billion is a remarkable achievement particularly as we will be adding over $110 billion in one year to reach here, despite huge logistics challenges, including container shortage, sky rocketing freight and liquidity constraints.
Merchandise and Current Account Balance improvement:
India occupies a leading position in global trade of agricultural products. However, its total agricultural export basket accounts for a little over 2.5 percent of world agricultural trade.
The major export destinations were USA, Saudi Arabia, Iran, Nepal, and Bangladesh.
Merchandise Trade: In the year 2020-21, there was decline in both exports and imports. However, as seen above, the decline in imports was higher than decline in exports.
Due to this reason, the trade deficit (Exports-Imports) in 2020-21 was lower in comparison to previous financial years.
Current Account Balance: The lower trade deficit was accompanied by increase in the export of software services increased from India.
On account of these reasons, Current Account was set to register surplus for the first time in the last 17 years.
- Top 3 Export commodities: Petroleum Products, Drug Formulations, Pearls and Precious Stones.
- Top 3 Export Destinations for India: USA, China, UAE.
- Top 3 Import Commodities: Crude Oil, Petroleum products and Gold.
- Top 3 Import sources: China, USA, UAE.
Suggestions to increase India’s increasing exports further:
India needs a sustained effort to reduce problems in the areas such as cost and ease of doing business, Market access via trade treaties, Technology and quality issues, Supporting Brand India for manufacturing,
Addressing cost issues: The government needs to urgently address cost issues related to land, power and capital, apart from addressing scale, which lowers cost disabilities.
Making companies more competitive: Addressing concerns around infrastructure and logistics, labour flexibility and strengthening MSMEs could also help in lowering costs for companies and make them more competitive in global markets.
India needs to push the “China plus one strategy” to attract investment from multinationals while positioning India as an export hub.
Conclusion:
“A country which is self-confident, which provides for its needs where people respect domestically made products and we are able to work with the rest of the world from a position of strength and are able to take on challenges of all sorts and compete on the strength of our farmers who toil day and night to produce truly exotic and wonderful fruits and vegetables and our fishermen who go out into the sea… it’s truly a time for all of us to reflect on our strengths and our future, dedicated the achievement to everyone in “Team India”.
