Explained | How significant is the attainment of India’s $400 billion exports target?

What helped increase the value to $400 billion for 2021-22? Will the high import energy bill offset some of the gains?

What helped increase the value to $400 billion for 2021-22? Will the high import energy bill offset some of the gains?

The story so far: On March 21, the value of India’s outbound shipments in fiscal year 2021-22 reached $400 billion, its all-time high. By the time the year closes this Thursday, another $10 billion worth of goods is expected to be shipped. This would translate into about 41% growth from the pandemic-hit year 2020-21, making it India’s fastest export growth since 2009-10.

How important is achieving India’s $400 billion export target?

First, 2021-22 reflects the first time in several years that the country has met its export target, but for greater context: India’s export trendline before the COVID-19 disruptions was nowhere near the mark. performance this year. According to data from the Reserve Bank of India, outbound trade in goods was $303.5 billion in 2017-18, $330.1 billion in 2018-2019, before falling to $313.4 billion in 2019-20, when the number rose slightly. dented as a result of the strict national lockdowns imposed. in the last week of that financial year. While higher commodity and oil prices helped boost the value of exports, with petroleum product exports rising more than 141%, some industrial sectors in India also shone. For example, exports of technical products increased by 46.5%, reaching the $100 billion mark for the first time, while chemicals, cotton yarn, hand-woven products and the apparel industry performed well. India has managed to meet its export target despite supply disruptions due to the pandemic, challenging sea container shortages and rising freight rates. Part of this could also be explained by the world shifting its global purchasing preferences to diversify their reliance on China following the outbreak of the COVID-19 virus. Australia, in the midst of a grueling trade battle with China, has given way to India, with exports up 94% this year. Shipments to the US are also up 47%. India hopes to consolidate these achievements and establish its credibility as a credible alternative to China, even though it could face stiff competition in some sectors from Asian counterparts such as Vietnam and Bangladesh.

What about imports and the trade deficit?

Even if exports could soar by nearly $120 billion this year, India’s imports have soared to record levels and could end up at nearly $200 billion above its $393.6 billion import figure for 2020-21. The trade deficit for the year could be about $190 billion, well above the $102 billion recorded in the pandemic year. The monthly trade deficit has risen sharply recently, reaching a record $22.9 billion in November 2021, with imports gaining more momentum than exports.

What are the risk factors for Indian exports in the coming year?

While India’s direct trade with Russia is insignificant at about 1% of its trade basket, the conflict between Ukraine and Russia may create some more opportunities for Indian agricultural exports, especially crops such as wheat and maize. But this would be offset by a sharp rise in India’s energy import bill and a rise in the cost of importing edible oils such as sunflower oil, whose production is dominated by the two nations at war. India imports 80% of its oil and demand is likely to increase as the economic recovery accelerates, provided the pandemic does not resurface. This could translate into a term-of-trade shock, with widening trade and current account deficits and continued pressure on the rupee, even as monetary tightening in the developed world could suck dollars out of emerging markets. RBI Governor Shaktikanta Das has pointed out that, unlike the 2013 taper tantrum, the country’s foreign exchange reserves, which are enough to cover more than 12 months of imports, are robust and could lead to higher current account deficits if necessary. finance. However, most economists expect the rupee to weaken in the 2022-23 period, which in turn could be a small benefit for exporters.

While high shipping rates, container shortages and realignment of trade routes around the Black Sea will present challenges, timely action on the policy front can help create more export opportunities. First, the rapid conclusion of FTAs ​​being negotiated with countries such as the UK, Australia and Canada could facilitate market entry in these major markets. Second, exporters are waiting for a much anticipated 2015-20 foreign trade policy review, which has now also been extended to the first few months of 2022-23. Third, a parliamentary committee has urged the government to include special economic zones and sectors such as pharmaceuticals, steel and chemicals under the Remission of Dutys and Taxes on Export Products (RoDTEP) scheme, which was launched last year after a significant delay. finally got underway. These could help offset some of the larger tectonic shifts in trade patterns of the European crisis, including a strengthening of the COVID-induced inward shift in countries’ attitudes toward globalization.

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