Explained: India’s buoyant export performance and why is the trade balance still unfavourable?

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India’s exports have risen nearly 50 per cent year on year in the first nine months of this fiscal, putting the country on track to hit a target of $400 billion in merchandise exports. India’s imports have also risen sharply during the same period leading to a sharp uptick in India’s fiscal deficit. India is pursuing a number of new Free Trade Agreements (FTAs) to expand opportunities for Indian exporters.

How have Indian exporters performed in FY22?

India’s exports between April and December 2021 hit $301.4 billion, up 49.7 per cent year on year and 26.5 per cent above exports during the same period in 2019. Exports of two traditional sectors — petroleum products and gems and jewellery — have been key contributors to the export growth in December, rising by 152 per cent and 16.2 per cent respectively, over the previous fiscal. India’s exports have been buoyed by a worldwide increase in trade with global merchandise trade posting a quarterly record of $5.6 trillion in Q3 2021, according to a report by United Nations Conference on Trade and Development. Global trade in both goods and services in 2021 is estimated to be worth $28 trillion, up 23 per cent from 2020 and 11 per cent when compared to pre-Covid-19 levels.

Among non-petroleum and non-gems and jewellery exports, engineering goods, such as iron and steel products, organic and inorganic chemicals as well as textile products such as cotton yarn and fabrics have been key contributors to export growth in this fiscal.

Exports of engineering goods grew 38.4 per cent in December to $9.8 billion, up from $7.1 billion a year ago. Exports of electronic goods rose 34 per cent to $1.7 billion, while that of organic and inorganic chemicals grew by 27 per cent to $2.7 billion during the same period.

A Sakthivel, President of the Federation of Indian Export Organisations (FIEO), said that the trend of growth in Indian exports is likely to continue as it is benefiting from the positive sentiment internationally. “Now, there is a good sentiment towards Indian goods internationally,” Sakthivel said, while adding that Indian exporters were increasingly understanding market requirements and upgrading their products.

Outbreaks of Covid-19 infections in key competitors such as Vietnam, leading to disruptions in supply, have also likely contributed to an increased demand for Indian exports.

India’s services exports have grown at an estimated 18.4 per cent to $177.7billion in the first nine months of the fiscal.

How have India’s imports grown and what is the impact on the current account deficit?

India’s merchandise imports have grown even faster than exports — at 68.9 per cent year-on-year in the first nine months of the current fiscal to $ 443.8 billion, up from $262.8 billion in the previous fiscal. Key imports for India during this fiscal so far include petroleum and petroleum products, gold and electronic goods.

Higher imports of machinery, electronic goods, vegetable oil, coal, and chemicals were key contributors to the sharp uptick in imports in the first three quarters of the fiscal.

The rise in imports has led to an increase in the trade deficit to $142.4 billion in the April-December period, up from $61.4 billion in the year-ago period, and $125.9 billion in the corresponding period in FY20. India’s services trade surplus is estimated to be about $74.4 billion in the first three quarters. Experts have estimated that India’s current account deficit for the fiscal will be about $40-$45 billion.

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What are key developments in Indian trade?

India is currently in the process of negotiating FTAs with the UK, UAE, Australia, Israel and the EU and is aiming to close interim trade deals with the UAE, Australia and the UK within this year.

Commerce minister Piyush Goyal has at multiple forums noted that Indian industry should be prepared to give market access to trading partners if it wants to benefit from greater market access for its own products.

“Our focus is wherever we have a competitive or comparative advantage, we should look at market access and wherever the advantage is with some other country, we don’t have to force the Indian consumer to buy expensive,” Goyal said to an industry body on Friday.

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