What has happened?
- India’s annual merchandise exports have hit $400 billion for the first time, achieving the target set by the government 9 days ahead of schedule.
- The government is confident of clocking $410 billion of exports by March 31, as India has been shipping out goods worth more than $1 billion a day.
What led to $400 billion?
- Engineering goods, petroleum products, gems and jewellery, chemicals and ready-made garments of all textiles were the top five commodities exported from India.
- Exports of engineering goods rose 32% in the first 11 months of this fiscal compared to the last financial year.
- It remained the biggest export item.
- Within this category, top exports were iron and steel, aluminium and aluminium products, electric machinery and motor vehicles.
- Exports of petroleum showed the sharpest jump of 114%, driven by a rise in crude oil prices.
- Meanwhile, agriculture exports hit a record, driven by commodities such as rice, marine products, wheat, spices and sugar, among others.
Now $1 trillion
- Piyush Goyal, India’s commerce minister, is in a rush.
- Goyal is now busy planning for the country’s manufacturing and services sector to clock in a record $1 trillion in exports in 10 years.
- “Now it’s time for the service sector and manufacturing sector to
- race to the top and see who will cross the $1 trillion export mark first,” Piyush Goyal, India’s Minister of Commerce & Industry, Consumer Affairs & Food & Public Distribution and Textiles,
- Said at the annual 2022 Forbes India Leadership Awards (FILA 2022) ceremony in Mumbai.
- India’s $400 billion export figure, announced earlier this week, is significantly higher than the previous record of $330 billion achieved in 2018-19, and 41 percent higher than the previous financial year when India exported goods worth $291 billion.
- The services sector, the minister reckons, meanwhile, is already at $250 billion.
- “We’ll soon have the numbers on service exports, and I promise you that’s going to be very, very exciting,” Goyal told leaders of India Inc at FILA 2022.
- While Covid-19 has caused a blip in India’s fast-paced growth, largely due to the lack of investments from the private sector,
- The minister reckons that the massive boost to exports in the coming years has the potential to change everyday life of millions of Indians.
But is it India’s best performance?
- While a surge in exports is good news for the pandemic-ravaged economy, it is important that policymakers not lose sight of the fact this is not India’s best performance.
- India’s exports performance had peaked in the last year of the UPA government’s ten-year tenure, FY14, when the exports-to-GDP ratio had shot up to 25.4%.
- In other words, more than a quarter of the GDP was coming out of the exports sector.
- In fact, during the boom years of the UPA government, exports were one of the growth engines of the economy, driving both jobs creation and GDP growth.
What about this time?
- In contrast, despite making the $400-billion mark for the first time this year the export-to-GDP ratio will barely cross 20%.
- For all the protection offered by the Modi government to domestic manufacturing in the form of sharp tariff increases and the fiscal subsidies from the budget by way of the productivity linked incentives, Exports are yet to match the exports-to-GDP level of FY14, the year that marked the height of the UPA government’s ignoble ‘policy paralysis’ phase.
- The exports-to-GDP ratio started declining after peaking in
- FY14, and was down to 23% in FY15, the first year in the Modi government’s tenure. It further declined to 8% in FY18.
- It started recovering thereafter and improved to 19.9% in FY19.
- But slipped back to 18.7% in FY20, where it remained also in FY21.
Where we are lacking?
- India’s performance in merchandise trade is in fact languishing behind that of competing economies.
- India’s share in global merchandise exports increased from 0.66% to 1.57% in the two decades from 2000 to 2020.
- At the same time, China’s share shot up from 86 % to 14.7% and Vietnam’s from 0.22% to 1.6%.
- In 2020, Vietnam’s share of global exports surpassed India’s for the first time.
- Poor policymaking hurt India’s export competitiveness when the economy, especially small and labour-intensive firms, was hobbled by demonetization and a poorly conceptualized and implemented goods & services tax (GST).
- These shocks dealt with the economy came over and above the legacy bottleneck of the banking crisis.
- Pharma products, electrical machinery, vehicles, plastics, furniture and textiles are among the 14 product categories,
- That the Confederation of Indian Industry (CII) has identified for India to clock $1 trillion merchandise exports by 2030.
- These would contribute over half of the target while the rest would be met fuels and gems & jewellery, among others.
- In its roadmap to achieve this target, the industry chamber said that India requires a 14% CAGR over 2022-2030 and Its share in global exports must be pegged at 5% in 2030 entailing 11x growth over 0.55% share in 2019.
- Besides, three other specific areas where new goods are emerging-defence, sustainability and digital technology-can be promoted to develop manufacturing and export capabilities, it said.
- In defence manufacturing, the target is to achieve $5 billion exports from the level of $1.2 billion in 2021 can be further doubled $10 billion by 2030, While solar panels, electric vehicles and green products should be focused on.
- Drones, robotics and automation, and smart products can be given a boost through sector specific policies on the lines of the Production-Linked Incentive schemes where these are not in place.
Q) As per latest SIPRI report, which is India’s 2nd largest arms supplier?