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Exports Stay in the Green Amid Logistics Challenges
Context: India’s exports saw gains in four of the top five destinations with a 6% increase to the US, 14% to the UAE, 6% to the Netherlands, and 13% to the UK.
Exports, Imports and Trade Deficit:
- Exports: India’s goods exports grew 2.55% year-on-year to $35.2 billion, marking a continued demand recovery in key export markets.
- Trade Deficit: It widened to $20.98 billion due to a 20% jump in petroleum import bill.
- Imports: Imports increased from China by 18.37%, while from Russia and the UAE surged by 18.57% and 48.15%, respectively.
- Sectoral Performance
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- Engineering Goods: Exports of engineering goods grew by 11.93%.
- Electronic Goods: Exports of electronic goods increased by 18.67%.
- Pharmaceuticals: Exports of pharmaceuticals rose by 11.58%.
- Spices: Exports of spices jumped by 11.50%.
- Petroleum Products: Exports of petroleum products declined by 18.30%.
India’s exports to 200 countries/territories:
Challenges and Future Outlook:
- Logistics Challenges: Exporters face “extraordinary” logistics challenges including:
- container shortages, shipping space issues, and irregular shipping schedules.
- Federation of Indian Export Organisations (FIEO) noted that exports could have achieved double-digit growth without these logistics disruptions.
- Other Challenges:
- Crucial to address the Middle East geopolitical situation and Red Sea challenges by ensuring container availability, marine insurance, and rational freight charges.
- Exporters struggle to obtain affordable finance due to high collateral demands, especially affecting small and medium-sized enterprises (SMEs).
- India’s export focus on a few sectors like engineering goods, textiles and pharmaceuticals makes it vulnerable to global demand fluctuations.
- Global protectionist policies and conflicts like the Russia-Ukraine war shrink export capacities.
- Global Growth: Positive global growth and easing inflation are expected to sustain India’s exports, with potential to cross $800 billion in total exports this fiscal year.
- Sectoral Needs: Sector needs deeper interest subvention, low-cost credit, marketing support, & finalisation of Free Trade Agreements with UK, Peru, & Oman.
Government Initiatives for Promoting Exports:
- Production Linked Incentive (PLI) Schemes, PM Gati Shakti National Master Plan (NMP), Duty Drawback Scheme, Remission of Duties or Taxes on Export Product (RoDTEP), Trade Infrastructure for Export Scheme (TIES) and Rebate of State and Central Taxes and Levies.
Way Forward:
- Boosting Exports from MSMEs: NITI Aayog report emphasises streamlined export processes for MSMEs, easier compliance and faster disbursement of incentives.
- It recommended the National Trade Portal (NTN) to streamline MSME exports.
- Leverage government initiatives like Smart Cities, Digital India, Skill India and Make in India to boost India’s manufacturing capabilities and service exports.
- Signing FTAs with strategic countries like UAE and Australia can reduce trade barriers and boost bilateral trade.