Updated: November 17, 2021 10:13:52 am
Trade data released by the Ministry of Commerce and Industry on Monday reveals that India’s merchandise exports have continued their stellar performance. Exports were up 43 per cent in October over the previous year, and 36 per cent above their pre pandemic level. Cumulatively, for the first seven months of this year, April to October, they stood at $233.54 billion, suggesting that India’s exports may well be on track to hit the $400 billion mark this year. Coming at a time when uncertainty over the underlying drivers of growth lingers on — domestic demand and investment remain subdued, and the ability of government spending to drive growth on a sustained basis is limited — a sustained, robust growth in exports could provide the much needed fillip to the Indian economy.
The country’s exports have benefitted from a stronger than expected global recovery. As per the United Nations Conference on Trade and Development, global trade is expected to be 28 per cent higher this year. Disaggregated data shows that the major drivers of India’s export growth so far this year have been petroleum products, gems and jewellery, engineering and electronic goods, and organic and inorganic chemicals — categories which, according to CRISIL, have the greatest responsiveness to global growth. On the other hand, import growth too has been fairly healthy. Imports in October were up 62.5 per cent from last year, and 45.7 per cent over their 2019 levels. For the April-October period, non-oil non-gold imports, which can be used as a gauge for domestic demand, were up 36 per cent over the pre pandemic levels.
Much of the upswing is a consequence of the process of normalisation of economic activities across the world. Thus the sustainability of such growth is debatable. Moreover, global trade is increasingly being affected by production and supply disruptions, and there are signs of the momentum in demand showing fatigue in some countries. Also uncertain is how the reconfiguration of supply chains over the medium term affects global trade. All this only underlines the urgency to reexamine various aspects of India’s trade policy. There are some indications of this already happening. After some hesitation, the government appears to be recalibrating its approach towards trade agreements. Several such agreements deals — early harvest deals — are being worked on. These may be precursors to larger, more comprehensive free trade agreements. Simultaneously, the government should also reexamine its tariff policy, and pivot away from protectionism. At this critical juncture, the policy thrust must be to enhance export competitiveness, and seek deeper integration with global value chains.
This editorial first appeared in the print edition on November 17, 2021 under the title ‘Pick-up signs’.
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