Virendra Pandit
New Delhi: Despite a global slowdown in demand, healthy growth in India’s total exports of goods and services buoyed up foreign trade in the first six months of 2023, which crossed the USD 800 billion mark, a think said on Monday.
“India’s foreign trade (exports and imports of merchandise and services) reached USD 800.9 billion during January-June 2023, a decline of 2.5 percent over the same period last year (January-June 2022),” it said.
Exports of goods and services rose by 1.5 percent to USD 385.4 billion during January-June this year, as against USD 379.5 billion in January-June 2022, said Global Trade Research Institute (GTRI).
Imports, however, dipped by 5.9 percent to USD 415.5 billion, as against USD 441.7 billion in January-June 2022.
Standalone, goods exports dipped by 8.1 percent to USD 218.7 billion, while imports contracted by 8.3 percent to USD 325.7 billion.
On the other hand, services exports during the six months period grew by 17.7 percent to USD 166.7 billion, while imports rose by 3.7 percent to USD 89.8 billion.
“Data is showing a modest decline due to weak global demand and losing competitiveness in labor-intensive sectors. The decline in merchandise exports happened despite the appreciating INR (Indian Rupee). The INR/USD exchange rate appreciated from 76.16 in April 2022 to 82.18 in April 2023,” GTRI Co-founder Ajay Srivastava said.
The world trade outlook for 2023 is weak because of a number of factors, including the ongoing war in Ukraine, high inflation, tighter monetary policy, and financial uncertainty.
“But these factors will soon be overshadowed by a spate of new subsidies and protectionist measures by the EU and USA. For example, in the first seven months of 2023 alone, the EU has introduced five regulations on climate change and trade, each being essential to curb imports,” he said.
India should continue to focus on increasing product quality and supply chain competitiveness, Srivastava said, adding since every big country is in an inward mode, India should not surrender its policy space, especially in new issues in Free Trade Agreements (FTAs) and Indo-Pacific Economic Framework for Prosperity (IPEF).
He urged the government to use targeted and precise retaliation to counter unilateral policy decisions like Carbon Border Adjustment Mechanism (CBAM) or EU Deforestation Regulation.
India did this effectively in 2019 by raising tariffs on US products when the US in 2018 raised tariffs on steel and aluminum, he said.
The GTRI report revealed that 11 of 29 product categories contributing to 25 percent of India’s exports registered positive export growth during January-June 2023, over the same period last year. These sectors include telecommunication, computer and electronics items, machinery, boilers, turbines, pharmaceuticals, and ceramic products.
Smartphone exports from India tripled as it jumped to USD 7.5 billion during January-June this year as compared to USD 2.5 billion in the same period in 2022.
However, exports in 18 of 29 product categories contributing to 75 percent of total merchandise exports declined during the period. These included cereals, vegetables, fruits, spices, fish, meat, dairy products, textiles, carpets, garments, footwear, and leather.
“Small firms active in labor-intensive sectors face 10-15 cost disadvantages due to high cost of capital, low-quality grid power, delays at the ports, and higher compliance cost. The PLI is not an answer to product categories where thousands of firms make the same products as it will put nonrecipients to a disadvantage,” Srivastava said.
He suggested that a horizontal scheme extending a 2-3 percent incentive to every firm in the sector will help in meeting some of the cost disability.
India exports goods to 240 countries of which its outbound shipments declined in 134 destinations.
Major countries where Indian exports declined include the USA, UAE, China, Bangladesh, and Germany. Countries where exports grew positively include the Netherlands, the UK, and Saudi Arabia.
“India’s exports exceed USD one billion with 41 countries. Its export promotion must focus on these countries as they account for 87 percent of India’s exports. Its exports grew positively in 12 of these countries and declined in 29 others,” he said.
During the January-June 2023 period, the top 15 countries with which India has the highest trade deficit include China (USD 38.1 billion), Russia (USD 29.6 billion), Saudi Arabia (USD 12.9 billion), Iraq (USD 12.5 billion), and Switzerland (USD 7.5 billion).
About the FTAs, the report said the share of FTA partners in India’s merchandise exports came down from 30.1 percent in the first six months of 2022 to 26.8 percent in 2023. This includes total merchandise exports and not the preferential exports for which data is not in the public domain.
Regarding crude, it said that import of petroleum came down 7.6 percent from USD 79.2 billion in January-June 2022 to USD 73.2 billion in January-June 2023.
“But, Russia’s share in India’s import of petroleum crude jumped from 6.4 percent in January-June 2022 to 31.3 percent in January-June 2023.
“Imports increased from USD 5.1 billion to USD 22.9 billion registering a growth of 350 percent,” Srivastava said, adding the share of imports from all other major suppliers like Iraq, Saudi Arabia, and UAE has declined substantially during this period.