Merchandise imports could hit record $700 billion this fiscal
3 min read 30 Mar 2023, 10:46 PM ISTIndia’s imports now exceed its exports for 22 of its top 25 trading partners, including China
PremiumNEW DELHI : India’s merchandise imports, fuelled by purchases of oil, precious metals, and electronics, are expected to rise 15% to a record $710 billion in FY23, a report from the Global Trade Research Initiative (GTRI) said.
Economists said that India’s import bill swelled largely owing to higher commodity prices following the Russia-Ukraine war and increased domestic consumption due to pent-up demand.
India’s imports now exceed its exports for 22 of its top 25 trading partners, according to the GTRI report. China remains India’s largest source of imports, accounting for $102.6 billion, nearly twice the amount of imports from the UAE, India’s second-largest source with $52.9 billion in imports.
“India has the highest deficit with China, exceeding $87.5 billion. China’s 65% of exports to India are in just three categories: electronics at $31 billion, machinery at $21.7 billion and organic chemicals at $13.6 billion," the report showed.
Despite the trend among multinational companies to pursue a “China-plus-one" strategy, which seeks to cut reliance on manufacturing and production in China by exploring alternative destinations such as India, the approach has not gained much traction in India, according to a recent parliamentary standing committee on commerce.
“India has not been able to take advantage of this opportunity, whereas smaller South Asian countries, such as Vietnam, Thailand, and Cambodia, have become the biggest beneficiaries of the China-plus-one Strategy. Despite the availability of resources and planning, India has not been able to create a positive impression among the businesses which are moving away from China," the committee said in its report. Notably, the government rolled out the PLI schemes in 2020 with an outlay of about ₹2 trillion for as many as 14 sectors, including automobiles and auto components, white goods, pharma, textiles, food products, high-efficiency solar PV modules, advanced chemistry cell, and speciality steel.
Smartphone exports have witnessed a sharp surge following the production linked incentive (PLI) scheme, and electronics exports have turned into one of the fastest-growing exports in the ongoing financial year.
According to the report, the standing committee recommended the department of commerce scrutinize the reasons for the slump in exports from crucial sectors of engineering goods, iron ore, spices, plastic and linoleum and cashew in FY23.
“Despite the presence of dedicated export promotion councils such as EEPC India for the promotion of export of Engineering goods, PEPC for promotion of export of plastics and Linoleum products and monitoring bodies such as Agricultural and Processed Food Products Export Development Authority (Apeda) for promotion of export of cashew nuts and its products, Spices Board for export promotion of spices, etc., negative growth has been registered in the above mentioned commodities for the current financial year," the standing committee of commerce stated.
GTRI further pointed out that vegetable oil and pulses remain the most significant imports in the agriculture sector, where imports touched an estimated $33.3 billion in FY23.
India’s overall exports crossed an all-time high of $750 billion, commerce minister Piyush Goyal said. At an industry event, the minister said exports have risen from $500 billion in 2020-2021 to this figure in extremely challenging times.
Amid a global economic slowdown, rising inflation, and increasing interest rates, India’s economy stands out as a source of pride, according to Goyal. However, experts caution that while the world’s GDP surpassed $100 trillion in 2022, the outlook for 2023 remains bleak, with GDP growth projected to be below 3% due to numerous challenges.
“[There is] high inflation in developed countries. Inflation in the US is 9%, and in the UK, Canada, and Germany [it] is in double digits. The Russian invasion of Ukraine [and the] US sanctions on Russia made the effect of war felt at the international level by restricting the supplies of oil and raw materials, leading to high prices. It’s no longer a two-country war. The world pays the price through high prices and supply disruptions," GTRI said.
With many countries feeling the impact of global headwinds beyond their control, 2023 is expected to see a turn towards domestic markets as a means of mitigating risks. The Indian economy will be moderately impacted by weak global demand and recession in large economies, GTRI stated.
