A holistic perspective on India’s external trade
As India has progressively liberalized its economy and ushered in policy reforms to boost ease of doing business, the impact on competitiveness of Indian businesses has also steadily improved. The share of exports of goods and services in India’s GDP has improved steadily from 7.05% to a peak of 25.43% in 2013. However, the share has kept dropping since that year to reach a low of 18.8% in 2017 before rising to 19.7% in 2018 (World Bank). Interestingly, this is slightly higher than China’s share of exports in GDP at 19.5%.
India’s merchandise exports have grown at a CAGR of just 1% between 2014 and 2018 to reach US$ 323 billion by 2018. Services exports have performed considerably better with a CAGR of 6.8% since 2014 to reach US$ 205.1 billion in 2018.
This lackluster performance has been attributed to global trends vis-à-vis economic slowdown and rising protectionism as well as domestic constraints like GST implementation, rising raw material costs, etc. Trade growth in 2018 was estimated at 3% compared to 4.6% in the previous year.
The Economic Survey 2018-19 affirms that the deterioration in India’s current account deficit (CAD) can be contained if “consumption slows down in the economy while increase in investment and exports become the new drivers of the Indian economy”. Given the importance of exports in GDP growth and employment, it is undeniable that India needs to embark on a carefully planned long-term strategy for export growth.
The approach from all stakeholders has to be extremely flexible to adapt to an highly dynamic global environment, to ensure that India is able to leverage the opportunities and address challenges in the short term.
This will involve various elements including: • Strategic reorientation of products and markets to exploit lucrative avenues for export enhancement
• Facilitating Indian firms to compete effectively in global markets
• Appropriate policy initiatives to incentivize exports and enhance ease of business
• Addressing the challenges, building consensus and adapting to the changing dynamics at the WTO.
• Building awareness of quality standards and ensuring Indian firms match their product quality with the requirements of target markets.
• Entering into relevant trade agreements/MoUs with careful analysis of trade complementarities to maximise mutual gain.
Under ‘Overview of India’s Foreign Trade’ TPCI presents an in-depth analysis of contemporary trends, evolving ecosystem, key stakeholders, policy framework, major issues and a future roadmap for India’s foreign trade. The following reports provide a holistic perspective on the current status and future trajectory of India’s trade, for the benefit of all stakeholders in the ecosystem.
• India’s trade with the World
• India’s Trade Policy
• India & the WTO
• India’s Trade Agreements