Exports to slow on sluggish global demand: Economic Survey
2 min read . Updated: 01 Feb 2023, 12:35 AM IST
PremiumDespite 25 yrs of diversification, 40% of exports go to 7 countries: Survey
NEW DELHI : The Economic Survey on Tuesday warned of a slowdown in exports due to sluggish global demand in the year starting 1 April as persistent geopolitical tensions disrupt global trade, although India is on pace to hit the current fiscal year’s export target.
“Overall, the balance of risks for global trade is tilted to the downside. The biggest downside risk emanates from the pandemic itself, particularly with the resurgence of new variants such as Omicron," the survey highlighted.
The survey further pointed out that global inflation, longer port delays, higher freight rates, shortage of shipping containers, and shortage of inputs such as semiconductors would continue to pose “significant risks" for global trade.
The survey highlighted the need for diversifying exports to new regions, pointing out that despite 25 years of diversification, 40% of India’s exports still come from just seven countries.
Chief economic adviser V. Anantha Nageswaran reiterated that supply chains are being reconfigured, and the government senses a big opportunity.
“Investment into and commitment towards the PLI (production-linked incentive) scheme demonstrates its determination to plug India into global supply chains. It is an industrial policy with a global vision," Nageswaran wrote in the survey.
Out of an ambitious export target of $400 billion set for FY22, India achieved more than 75% of it by exporting goods worth $301.4 billion, which is higher than the export target of $300 billion set for April-December 2022.
The survey said that it is a testament to the fact that India is well on track as far as attaining the export target is concerned.
A sharp recovery in key markets; increased consumer spending; pent-up savings, and disposable income due to the announcement of fiscal stimulus by major economies; global commodity price rise, and an aggressive export push by the government have bolstered exports in FY22, it added.
On the rupee settlement mechanism launched by the Reserve Bank of India (RBI) in June, the survey said that the framework could largely reduce the net demand for foreign exchange, the dollar in particular, for the settlement of current account-related trade flows.
Further, the use of the Indian rupee in cross-border trade is expected to mitigate currency risk for Indian businesses. Protection from currency volatility not only reduces the cost of doing business but also enables better business growth, improving the chances for Indian businesses to grow globally. “The INR accounted for 1.6%. If the INR turnover rises to equal the share of non-US, non-euro currencies in global forex turnover of 4%, INR could be regarded as an international currency, reflecting India’s position in the global economy," the survey stated.
