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India may set itself a more conservative exports growth target for 2022-23 after clocking high double-digit expansion in the last fiscal year, in view of global headwinds, including a demand slowdown across key markets such as the EU and China.

While the ministry of commerce and industry is yet to finalize the merchandise export target for FY23, internal discussions suggest that India may look at a 10-12% growth over the $419 billion recorded in FY22 amid supply chain disruptions.  

The World Trade Organization (WTO) has already revised its global trade growth forecast from 4.7% to 3% for FY23 due to the geopolitical uncertainties emanating from the Russia-Ukraine war and a prolonged covid-induced lockdown in China. 

“This year’s export target will need to be scaled down in view of the disruptive factors. There is apprehension among the exporters and nobody is sure of the exact nature of the impact of the disruption in supply chains. Quantifying these factors is an uphill task," said a government official involved in the discussions.

“Last year, exports grew 43% but over a low base of $290 billion. Assuming a similar growth rate is difficult. And that, when there are indications that global trade is likely to go down,“ he added seeking anonymity.

“We are consulting stakeholders before finalizing the target," a second official said also seeking anonymity.

“China is under a prolonged lockdown and China’s demands have been driving up international trade for a very long time. China apart from being a big exporter was also becoming a big importer. If the lockdown continues there will be an impact," the first official said.

China accounted for over 5% of India’s exports in April-February of FY22, while the EU accounted for 15%.

Ajay Sahai, director general and chief executive, Federation of Indian Export Organisations, said amid persisting global uncertainties, it was better to wait for 3-6 months before setting the target to have a clear view of the global situation. “I am not looking at an over 20% growth target for FY23. The Russia-Ukraine war will give India a much better market in many parts of the world at the cost of Russia… so we need to see how these factors pan out."

International Monetary Fund’s India Mission chief Nada Choueiri said a sharp slowdown in China could affect India’s growth. “China is India’s third largest export destination and the largest import origin. Therefore, a broad-based and protracted growth slowdown in China could impact India through the trade channel."

One balancing factor is export opportunities arising from supply gaps left by Russia, Ukraine and crisis-hit Sri Lanka, and these may drive India’s outbound shipments. India is looking to export 10 million tonnes of wheat this fiscal, and enquiries for textiles, engineering and tea are on the rise from the EU. Russia too is looking at India for essentials following disruptions of supplies from the EU.

Recent free trade agreements with the UAE and Australia may also help India increase exports. “We project India’s export to continue to expand in FY23. The war in Ukraine has affected the growth outlook in the EU, which is negative for India’s exports, but there are a number of factors mitigating this impact. First, rising international food prices stimulate India’s food exports… In addition, we are taking into account the government’s export-promotion strategies," said Choueiri.

“On the domestic front, government policies for export infrastructure development (under Trade Infrastructure for Export Scheme) are expected to support exports over the medium term."

ravi.dutt@livemint.com

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