India’s Export Sector

24 Jul India’s Export Sector

This article covers “Daily Current Affairs” and the topic details “India’s Export Sector”. The topic “India’s Export Sector” has relevance in the Economy section of the UPSC CSE exam.

For Prelims:

Target Range?

Current Scenario of Indian Export?

For Mains:

GS 3: Economy

Factors Influencing Exports?

Challenges for the Export Sector in India?

Way Forward?

Why in the news?

India’s exports have encountered a challenging start this year, experiencing a significant contraction of 15.1% during the April to June 2023 quarter. This decline comes after the country’s outbound shipments of goods had reached a notable milestone, surpassing $450 billion in the previous year.

Target Range:

Target USD 2 Trillion by 2030:

• India’s new Foreign Trade Policy (FTP) 2023 aims to achieve a total export of USD 2 trillion by 2030, with services and goods exports accounting for a trillion dollars each.
• This long-term objective will be considered while setting the current year’s export targets.

Import to GDP Ratio of Importing Countries:

• The government will take into account the import to GDP (Gross Domestic Product) ratio of the countries that are major importers of Indian goods.
• This ratio provides insights into the potential demand for Indian products in various international markets.

Export to GDP Ratio of India:

• The export to GDP ratio of India will be assessed to gauge the country’s export potential and capacity.
• This analysis helps in understanding the share of exports in India’s overall economic output.

Trend Growth of Past Years:

• The past growth trends in exports will be analyzed to understand the trajectory of India’s trade performance.
• Considering historical growth patterns helps in setting achievable targets for the future.

Target Range: Based on the figures of FY 2022-23, where exports amounted to USD 450 billion, and assuming a conservative growth rate of 10%, trade experts suggest the following potential target range for the current year’s exports:

• Lower End of Range: USD 451 billion (Slightly above the previous year’s exports)
• Upper End of Range: USD 495 billion (Assuming a 10% growth rate).

Monitoring Mechanism:

• The Department of Commerce will use a fixed number, which could be a mid-value or an average, to track export performance every month.
• This monitoring mechanism provides timely insights into the progress of exports and allows for necessary adjustments if required to achieve the set targets.

Current Scenario of Indian Export:

• Goods exports have experienced a series of deceleration, with a 22% drop in June 2023, the steepest fall in 37 months.
• Exported services also witnessed a slowdown, with forex earnings from intangible exports growing by only 5.2% in the first quarter of 2023-24, compared to about 28% growth in the previous year.

Factors Influencing Exports:

Global Oil Prices:

• Petroleum exports saw a sharp plunge of 33.2% in the first quarter due to reduced global oil prices.
• Price cap sanctions on Russian oil shipments also contributed to a moderation in demand.

External Factors: The World Trade Organisation’s (WTO) forecast of slower global trade growth in 2023 is influencing India’s export outlook.

Status of the Export Sector in India:

• Merchandise trade deficit increased by over 39% in 2022-23 to record USD 266.78 billion, compared to USD 191 billion in 2021-22.
• Merchandise imports increased by 16.51% in 2022-23, while merchandise exports rose by 6.03%.
• Overall trade deficit stood at USD 122 billion in 2022-23, compared to USD 83.53 billion in the previous year.

India’s Major Export Arenas:

• Engineering Goods: Registered a 50% growth in exports, reaching USD 101 billion in FY22.
• Agriculture Products: Rice exports worth USD 9.65 billion, the highest among agricultural commodities.
• Textile and Apparels: Textile and apparel exports stood at USD 44.4 billion in FY22, a 41% increase on a YoY basis.

Challenges for Export Sector in India:

Challenges in Access to Finance:

• Exporters face difficulties in obtaining affordable and timely finance due to high interest rates, collateral requirements, and limited credit availability, especially for SMEs.
• Limited Diversification:
• India’s export basket is concentrated in a few sectors, making it vulnerable to global demand fluctuations and market risks.

Rising Protectionism and Deglobalisation: Increasing protectionist trade policies globally are shrinking India’s export capacities.

Major Government Initiatives to Promote Export Growth:

• Trade Infrastructure for Export Scheme (TIES)
• PM Gati Shakti National Master Plan (NMP)
• Duty Drawback Scheme

Way Forward:

• Investments in transportation networks, ports, customs clearance processes, and export-oriented infrastructure should be prioritized.
• Skill development programs should be implemented to enhance the availability of skilled labor in export-oriented industries.
• Incentivizing and promoting technology adoption, such as automation and digitization, can boost productivity and competitiveness in the export sector.

SOURCE:https://www.thehindu.com/opinion/editorial/downhill-driving-the-hindu-editorial-on-indias-overall-trend-of-exports/article67112415.ece

INFOGRAPHIC: The Guardian

Q.1 What is the target range approach adopted by the Indian Government to promote exports?

1. Setting an export target of USD 2 trillion by 2030
2. Analyzing the past growth trends in exports
3. Considering the import to GDP ratio of major importing countries

Select the correct answer from the options below:

(A) 1 and 2 only

(B) 2 and 3  only

(C) Both 1 and 3 only

(D) 1, 2 and 3

ANSWER: D

Q.2 India’s new Foreign Trade Policy (FTP) 2023 aims to achieve a total export of USD 2 trillion by which year?

(A) 2025

(B) 2030

(C) 2040

(D) 2028

Answer: B

Q.3 Discuss the challenges faced by the Indian export sector and the major government initiatives taken to promote export growth. What measures should the government undertake to further enhance India’s export competitiveness?

rishabh