Despite multiple downside risks, the unexpected but resounding resilience of India’s external sector during the current year augurs well for growth revival in the economy, the Economic Survey 2021-22 has said.
Tabled in both houses of Parliament, the Survey has pointed to a major rebound in India’s merchandise exports and imports over a short period of time, which had not been expected by policymakers earlier. "This is remarkable in view of moderation in global trade growth, elevated shipping rates, and persistent problem of container shortages," the Survey noted.
Out of an ambitious export target of $400 billion set for 2021-22, India has already attained more than 75 percent of it by exporting goods worth $301.4 billion, which is actually higher than the export target of $300 billion set for the April-December period of 2021-22, the Survey pointed out.
A sharp recovery in key markets, increased consumer spending, pent-up savings and disposable income due to the announcement of fiscal stimulus by major economies, global commodity price rise and an aggressive export push by the government have bolstered exports in 2021-22. Since all these key factors are set to continue for the time being, the Survey placed trust on exports continuing to perform well in the next financial year as well.
"However, the downside risks of global liquidity tightening and continued volatility of global commodity prices, high freight costs, coupled with the fresh resurgence of COVID-19 with new variants may pose a challenge for India during 2022-23," the Survey warned.
The Survey pointed out that even the segments like marine products, buffalo meat, tea, coffee, and dairy products, which had not performed well during 2020-21, have registered substantial growth during the current year. Stressing that this augurs well for further diversification and strengthening of agricultural exports in the coming years, the Survey outlined the growth potential of the promising sector.
Taking advantage of the increased demand for staples during the COVID-19 pandemic and backed by an increased focus on agri exports, the export of agriculture and allied products (including marine and plantation products) grew by 23.2 percent to US$31.0 billion during April-November, 2021, the Survey said. Moneycontrol had earlier reported how the sector has been the best performing one in 2021-22.
However, the Survey also recognised that export growth got a large leg-up due to the ongoing global commodity supercycle, whereby prices of most major commodities have sharply risen. "Due to the large rise in global crude oil prices, petroleum products continued to be the most exported commodity in April-November 2021, whose exports have more than doubled and their share (in total exports) rose to 14.9 percent," the Survey said.
Similar to previous years the economic survey has laid stress on the urgent need to diversify India's exports not only in terms of what the country sends out but also to where. "India has diversified its export destinations in last 25 years, yet more than 40 percent of India’s exports are still accounted for by only seven countries," it noted.
Moneycontrol has reported that the government is actively seeking to finalise proposed trade deals with a raft of nations and aiming to forge strategic trade partnerships with all of them in 2022. The Commerce Department is currently negotiating up to eight free trade agreements that have increasingly been billed as the most important way to boost exports in the mid-to-long term future.
"A further push in this direction would help provide the institutional arrangements to, inter alia, diversify both products and destinations," the Survey noted.
Meanwhile, the Survey noted that an efficient, competitive and resilient logistics ecosystem is pivotal to boosting exports. "Despite multiple challenges, India has made substantial progress in trade-related logistics, reflected in leading global indices, but more needs to be done," it said.
India scored 90.3 percent in 2021 in United Nations Economic and Social Commission for Asia Pacific’s (UNESCAP) latest Global Survey on Digital and Sustainable Trade Facilitation, a remarkable jump from its score of 78.5 percent in 2019, on account of improvement in scores of five key indicators.Currently, India is the best-performing country when compared to the South and southwest Asia region (63.1 percent) and Asia Pacific region (65.9 percent).