India achieved the ambitious target of crossing $400 billion in exports on March 22, 2022, 9 days ahead of the scheduled target of FY22. With this India has achieved a key milestone in its journey towards becoming ‘Aatmanirbhar’. Here is a 7 Point Analysis of How India achieved this $400 billion target and what are the key drivers?
1) India’s Export Trend:
- In 2017-18, India hit the mark of $300 billion in merchandise exports which then got increased to $331 billion in FY19.
- Owing to the Covid-19 pandemic, the merchandise export in FY20 and FY21 was quite lower than the previous year which stood at $314.3 billion and $290.6 billion respectively.
- But this trend got rebounded in FY22 when India’s export marked the $400 billion milestones ahead of the end of FY22 on 22nd March 2022. By the end of FY22, this merchandise export value stood at $418 billion.
- India added around $25.19 billion in exports so far in March (as of 22nd March 2022).
2) Consistent Growth in India’s Merchandise Exports in FY22:
- From April 2021 to February 2022, there is consistent growth in the export monthly which is growing at an amount of around or above $30 billion every month.
- The Cumulative export value stood at $30.6 billion in April 2021 which rose to $197.1 billion in September 2021 and then grew to $374.8 billion in February 2022.
- The growth in the merchandise export between April 2020-February 2021 to April 2021 to February 2022 stood at around 46%.
3) Average Run Rate of Goods Export in FY22:
- On an hourly basis, India was exporting around $46 million of exports, and exports of around $1 billion on daily basis. The monthly run rate of merchandise export was around $33 billion.
- The key factor in driving India’s economic growth is export.
- Some of the other key contributing factors are:
- Closer engagement with exporters and faster resolution of issues
- The whole Government approach with closer interaction at the level of states & districts
- Actively engaging export promotion council.
4) Strong Recovery against Pandemic-led Slump:
- During the pre-pandemic period which is around the year 2019, the value of merchandise export was hovering at levels of above $25 billion per month.
- The export got hit by pandemic during FY20 and FY21 on account of the Covid-19 pandemic, but March 2021 was the month where the monthly export trend surpassed the pre-pandemic level with exports of $34.5 billion.
5) What are the Top Exported Commodities?
- For February 2022, Engineering Goods is the commodity that contributed the most towards India’s merchandise export of value of $9.3 billion. The exports of engineering goods increased by 32% YoY.
- Next to engineering goods are Petroleum products where the export value in February 2022 was $4.6 billion with a growth of 88.1% YoY.
- The value of exports of Gems & Jewelry and Organic & Inorganic Chemicals stood at $3.16 billion and $2.42 billion respectively.
6) To Whom India is Exporting the Most?
- Firstly, engineering goods is being mostly exported to the United States of America.
- Petroleum products are being exported to the United Arab Emirates.
- Gems & Jewelry is being highly exported by China whereas Organic & Inorganic Chemicals are majorly exported by Bangladesh. The Netherlands exports Drugs & Pharmaceuticals the most from India.
7) Key Drivers of Upsurge in Export in FY22:
i) Pent-Up Demand:
- The recovery in muted demand amid Covid has benefited the most to India for such high merchandise export.
- There was a strict lockdown during the waves of Covid-19 across the globe which impacted global trade to a much higher extent.
ii) Boost in Domestic Manufacturing:
- The Production-Linked Incentive (PLI) Scheme has also helped extremely the country to boost domestic manufacturing.
- Further, there was also some implementation of some Interim Trade Pact with different nations.
iii) Government’s Push for Promoting Exports:
- The government has also given a strong push towards export which also resulted in an upsurge in export in FY22. They are:
- Introduction of Refunds of Duties and Taxes on Exported Products (RoDTEP)
- Rebate of State and Central Levies and Taxes (RoSCTL) Schemes
- Launch of Common Digital Platform for Certificate of Origin to facilitate trade and increase FTA utilization by exporters.
- Promoting districts as export hubs bu identifying products with export potential in each district and addressing bottlenecks
- Promoting ease of doing business.
8) How Indian Government Set a $400 billion Target and What were the Steps Taken?
- $400 billion export target export was generated through the Bottom-Up Approach.
- Then Trade Potential for different countries was assessed based on past trends.
- Moving ahead, Exports were examined by Product and also by State. Around 200 countries and Territories were targeted by the Government for Exports.
- Special Emphasis was also laid on:
- New & Existing Markets & Products
- Lost Markets
- Quick wins where the Country has Strengths
- Faster resolution of Exporter’s Issues
- MSME & startups were used as a vehicle for exports.
9) Why are Exports Important?
- In simpler terms, Exports are important for any country to obtain foreign exchange reserves which can be further used for the payment of import bills, and other uses as well.
- Exports are one of the fundamental drivers of growth for any economy.
- Exports can influence a country’s GDP, exchange rate, level of inflation as well as interest rates.
- Robust Exports are very beneficial for the country as they can:
- Increase job opportunities
- Enhances Foreign Currency Reserves
- Boost Manufacturing
- Increase Government Revenue Collection
- Exports are the goods means by which a country can bring itself out of the Recession phase where it targets important factors- GDP and Unemployment. Exporting to countries with a favorable economic climate helps in increasing the GDP levels as well as helps in reducing unemployment.
- Exports play a key role in strengthening domestic manufacturing units by scaling up their quality to make Indian products compete and stand out against global peers.
- Strong export depicts the country’s resilience, and commitment, and clearly shows Global Trust for the Make in India brands.
i) Export and GDP Correlation:
- GDP growth has been declining even before Covid-19 struck in 2020.
- The robust GDP growth of 7% GDP was achieved in a year, FY18 when the exports showed a robust 10% rise.
- From 2018-19 onwards, with the fall in GDP, exports also started declining.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.