Economy
What $400 bn merchandise exports mean for the economy
Summary
India achieved its merchandise export target of $400 billion for FY22, backed by strong performance in petroleum products, precious and semi-precious stones, engineering goods, drugs and pharmaceuticals. Mint examines what the milestone means for the economy.India achieved its merchandise export target of $400 billion for FY22, backed by strong performance in petroleum products, precious and semi-precious stones, engineering goods, drugs and pharmaceuticals. Mint examines what the milestone means for the economy.
What policy steps led to this exports’ boost?
India’s updated Foreign Trade Policy launched on 1 April 2015 rationalized previous export promotion schemes and introduced new ones. The government opened a dedicated division for unified development of the logistics sector, launched an interest equalization scheme to facilitate cheaper credit to exporters, unveiled an agriculture export policy, classified districts as export hubs by identifying products with export potential and addressing bottlenecks, and reached out to potential exporters, especially from the MSME sector, and mentored them.
How does the PLI scheme help exports?
The Production Linked Incentive (PLI) scheme was introduced to boost domestic manufacturing and exports by incentivising incremental sales to make India competitive in global markets. The scheme is open for sectors such as textile products, automobile and auto components, drugs, mobile phone manufacturing and specified electronic components. It aims to boost manufacturing capabilities and encourage export-oriented production. For example, India has been trying to raise its share in global textile exports. The PLI scheme is expected to raise mobile phone exports to $5.5 bn in FY22 from $3.16 bn in FY21.
What has been the trend in merchandise exports?
Before this year’s $400 billion milestone, the previous record was in 2018-19, when merchandise exports reached $331.02 billion. During April-February 2022, merchandise exports were $374.81 billion, up 46.09% from April-February 2020-21. Services exports for April-February 2021-2022 have also shown a rise of 22.49% vis-à -vis April-February 2020-21.
How do greater exports help?
India’s exports of goods and services as percentage of GDP was approximately 21.7% in April-December 2021-22, and 19% in FY21. Higher export demand creates access to diversified market opportunities, increases availability of foreign exchange, and raises job opportunities especially in labour-intensive export sectors, powering economic growth. Exports, a key demand growth engine of the Indian economy, quickly surpassed pre-covid levels and has performed well in FY22.
Will the Ukraine war hit external trade?
The war has caused supply chain disruptions and container shortages, driving up freight rates, and prices of crude oil, commodities and various key raw materials. This could lead to cost push inflation, narrowing the price advantage of Indian exported commodities. While the war has also raised import costs of edible oil, costlier imported fertilizers will also drive up input costs for farmers.
Jagadish Shettigar and Pooja Misra are faculty members at BIMTECH.
