The Centre’s announcement that India’s merchandise exports have already surpassed the target set for this fiscal year, with overseas shipments crossing a record $400 billion mark by March 21, brings much-needed cheer to an economy still struggling to recover from the bruising impact of the COVID-19 pandemic. The export rebound, coming on the back of last fiscal’s pandemic-induced slump in global demand, is particularly heartening as the key value-added sectors of engineering goods and apparel and garments have done well this year. Engineering goods, in particular, have registered almost 50% year-on-year growth, while ready-made garments logged a more than 30% increase, in the April-February period, as per provisional data from the Commerce Ministry. However, in terms of the sheer scale of increase, petroleum products were the standout performer as the global surge in oil prices lifted the dollar value of overseas shipments of goods produced at India’s refineries by 150% over the first 11 months of the fiscal. The fact that the export growth has been achieved against the backdrop of persistent logistical challenges, including container shortages and port congestion that have pushed up freight rates, is laudable and reflects the concerted effort made by the government in coordination with industry and the country’s overseas missions. Interestingly, Commerce and Industry Minister Piyush Goyal made a pointed reference to the role played by India’s embassies and envoys in exploring new opportunities for Indian products, and if the current momentum in exports is to be sustained in the coming years, the diplomatic corps will need to enlarge their role in trade promotion.
Still, the cheer of attaining the milestone needs to be tempered by the acknowledgment that multiple challenges persist on the trade front. Imports have outpaced exports this year, almost doubling the trade deficit in the April-February period to more than $175 billion. The gap is wider than the pre-pandemic year of 2019-2020 as well and points to the pressing need to step up the pace of export growth if the deficit is to be shrunk meaningfully. While global inflation in commodity prices certainly contributed to enlarging the value of both exports and imports, the fact that project goods were the only item of import, among the 30 broad categories listed by the Ministry that contracted over the 11-month period, is also cause for disquiet. The lack of overseas purchases of capital goods for new projects is a clear indicator that private Indian businesses are still wary of making fresh investments given the lack of momentum in personal consumption. With the war in Ukraine and sanctions on Russia now posing fresh problems for exporters seeking to ship goods to not only these countries but other markets in Europe as well, policymakers must go beyond stopgap measures such as enabling rupee-rouble trade and expedite ongoing negotiations on the raft of free trade agreements so as to at least help lower some of the tariff walls.
