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India’s Trade Volume Shrinks UPSC NOTE

 


India’s export-import value - recent

  • After hitting a record $775 billion in 2022-23, India’s exports are off to a rocky start this year.

  • Outbound shipments of goods, that had crossed $450 billion last year, have contracted 15.1% through the April to June 2023 quarter. 

  • June’s provisional export tally, just shy of $33 billion, was the lowest figure in eight months and reflected a 22% drop year-on-year, a scale of contraction last seen amid the initial months of the COVID-19 lockdowns. 

  • There has been a decline in the import bill as well over the first quarter, albeit at a slower pace than exports. 

  • This 12.7% dip is largely driven by the prevalence of lower commodity prices this year compared to the same quarter last year, when the import bill had shot up 44.5% after the Russia-Ukraine conflict erupted. 

  • Excluding gold and oil imports, the value of shipments coming into the country is down 10.5% in the first quarter. 

  • Sequentially, the decline in non-oil, non-gold imports has accelerated from 2% in May to 16.7% in June, indicating that domestic demand triggers are also gradually declining.

  • While this implies the goods trade deficit may not widen as it had last year.

  • It does not augur well for domestic growth impulses that form India’s key weapon against the gathering global slowdown.

  • Services exports are still growing but at a far more sombre pace. 

  • That IT majors, who drive most of these intangible exports, have been tentative and decidedly downcast about their earnings guidance for this year, indicates the tide may get worse. 

  • Frail global demand may not just impact trade flows but also hurt foreign direct investments even as tightening monetary policies could exacerbate financial market volatility. 

  • As the Finance Ministry noted recently, if these trends deepen, the 6.5% growth hopes for the year could unsteady. 

  • But retail sales in the U.K. have improved in June, although fractionally. 

  • Inflation numbers have eased in Europe and the U.S., triggering hopes of interest rate pauses instead of further tightening to throttle demand and activity.

Steps to be taken

  • Rising shipments of electronic goods must flourish while trade curbs or obstacles affecting other products must be reviewed. 

  • Indian policymakers should redouble efforts to improve competitiveness vis-à-vis rivals such as Vietnam.

  • Keep a closer watch on divergent trends in different markets to help exporters capture incremental, even if fractional, global demand.

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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: India’s Trade Volume Shrinks UPSC NOTE
India’s Trade Volume Shrinks UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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