Context: The merchandise exports shrank by 15.1 % in the first quarter of the current financial year. This is against the backdrop of a record feat of $450 billion of merchandise exports in the year 2022-23.
Trends for the last three months-In April and May, exports of goods slowed by 12.6% and 10.2%, respectively. However, with a 22% drop in June, they fell the most in 37 months. Last month’s total exports of $32.7 billion were the lowest since October 2022.
Reasons for the Dip in Exports:
- Global Slowdown: Slowdown in major economies, including the US and Europe.
- Inflationary pressure and tightening monetary policy stand has affected the manufacturing and business in major economies of the world.
- Base Effect: The year 2022-23 witnessed a huge surge in merchandise exports amounting to $450 billion. The current year amidst a global slowdown is showing decreasing trends due to base effect.
- Reduced Demand: Due to a slowdown there is reduced demand for engineering goods. While some markets in Latin America, West Asia, the region of North Africa, and portions of Europe have seen demand, the majority of other markets have experienced muted demand.
- Petroleum exports: It saw the sharpest plunge of 33.2% in the first quarter, that this was largely driven by the reduction in global oil prices.
- Exports of engineering items: It has recently made up a sizable portion of India’s total exports, decreased by more than 4% in May to $9.3 billion.
- Way Ahead:
- Goal for 2030: Under the new Foreign Trade Policy, our overall goal for exports is to reach $2 trillion by 2030, with services and goods each making up a trillion dollars.
- Course correction: We must set multiple goals rather than move with a single goal in light of the World Trade Organization’s forecast for slower growth in global trade in 2023.
Merchandise Exports Basket of India:
Image source: Statista 2022 |
News Source- The Hindu.