Despite headwinds, India’s exports look set to achieving $2 trillion export of goods and services by 2030.
New Delhi: It was the best of times, it was the worst of times. Charles Dickens famous and exhaustively borrowed words finds its latest fitment in the context of India’s exports which amidst economic crisis of the West, geopolitical turmoil brought on by the Russia-Ukraine war and severe supply disruptions, is confidently looking to surpass the phenomenal USD 420 billion earnings in fiscal 2021-22 and achieving USD 2 trillion export of goods and services by 2030. With expanded footprint and quantum jump in Indian shipments during the previous fiscal in developed economies including US, Netherlands, Singapore, Hong Kong, UK, Belgium, Germany and brisk negotiations for free trade agreements to penetrate markets offering the right dynamics, Commerce Minister Piyush Goyal envisages a 25% share of exports in an estimated USD 30 trillion Indian economy by 2047.
As the fastest growing economy in the G20 nations which exercise clout in shaping global socio-economic trends and represent 80 percent of global trade, India’s presidency thus offers an opportune moment to “push for enhanced integratedness with G20 which can scale up the current value of total exports at USD 212 billion in 2021-22 to the level of USD 300 billion by 2024-25 and USD 500 billion by 2029-30”, shows a research by the PHD Chamber of Commerce & Industry (PHDCCI).
On the face of it though India’s recent export performance suggests a different story marked by consistent outpacing by imports and wide trade deficit. The country’s merchandise exports rose by barely 0.6%, year-on-year in November 2022—after having contracted by 16.6% in Oct 2022—largely led by a pick-up after the end of the holiday season. During April-November FY2023, merchandise exports have risen by 11.1% reflecting the impact of the slackening in demand from key export destinations as against a sharper 29.5% increase in merchandise imports during the same period due to domestic demand, some recovery in investment demand and higher commodity prices, as per ICRA Rating Chief Economist Aditi Nayar.
Going ahead, the scene is not very different with an expected dip in merchandise exports by 7% in December-March FY2023 owing to slowdown in key export destinations and softer commodity prices. Overall, FY2023 is expected to close with the projected 3% growth in merchandise exports substantially trailing the 18% growth in imports as per ICRA estimate. That apart, India’s share of global trade remains weak at less than 2% of global merchandise exports, and less than 3% of global merchandise imports, even as the size of its economy grows. India’s global trade participation through GVCs is also lower than that of smaller economies like South Korea and Malaysia.
There is, however, an upside to India’s export growth story in the services sector with the yoy expansion in exports and imports at a robust 24.6% and 15.9% respectively, in November 2022 with the levels sharply exceeding the pre-Covid performance of October 2019. India’s services exports have grown by a healthy 29% yoy in April-October FY2023 but Nayar sees the services trade balance increasing to USD 124-127 billion in FY2023 from USD 107.5 billion in FY2022, on the back of robust exports.
While sustaining this advantage, the Government is keen to fire from all cylinders and ramp up merchandise shipments to reap the benefits of a double engine export engine. The G20 leadership can open up doors to this ambition. Among the G 20 countries, India holds trade surplus only with 8 economies. Industry data shows that of India’s top three trading partners, USA is India’s largest with USD 119 billion trade of which India’s exports are $76 billion and imports from USA are $43 billion with a trade surplus of $33 billion. China is India’s second largest trade partner with $115.8 billion of which India’s export to China are $21.3 billion and imports are $94.6 billion with a trade deficit of $73.3 billion. Saudi Arabia is India’s third largest trade partner in the G20 with $42.9 billion trade of which India’s export is $8.8 billion and imports are $34.1 billion with a trade deficit of $25.3 billion.
In that context, the PHDCCI study of 75 products which currently contribute $175 billion (around 40%) in India’s total exports has huge implications. World total imports of these products comprise more than $3700 billion and India’s presence in these products is less than 5% as total world imports. Since India’s 50% of exports are towards the G20 countries, there is an immense potential to enhance India’s exports in such products towards G20 countries.
The G20 leadership also comes opportunely amidst India’s growing engagement with the world through Free Trade Agreements (FTAs). India has only three FTAs with G20 nations including Australia, Japan and the Republic of Korea out of the total 13 FTAs and 6 Preferential Trade Agreements (PTAs) it has signed with various countries. Going ahead, signing FTAs—following successful conclusion of ongoing negotiations and planned ones—with other potential markets such as Canada, United Kingdom and the European Union can result in substantial expansion of India’s exports with G20 countries. The prospects are immense, involving a scale up from $212 billion in 2021-22 to the level of $500 billion by 2030.
Ritika Passi who is currently developing the international trade programme at Global Trade Observer opines that as Chair of the G20, India can promote a constructive trade in areas as integration of the MSME sector in national economies and global trade which is also a priority for developing countries. The issue has seen growing attention and gradual progress at the G20. India’s domestic experience with MSMEs can advance conversation on this front, particularly on the use of digitisation having developed an Open Network for Digital Commerce (ONDC), currently in pilot phase, to connect sellers, buyers, payment processors and logistics partners.
India also has an opportunity to advance the food corridor launched under the India-Israel-UAE-US grouping with a $2-billion investment by UAE to build food parks in India that will use Israeli and US technology and private sector expertise. Given that 2023 is the International Year of Millets, and India is currently the fifth-largest exporter of the grain, it could announce a millet corridor along the same lines.