Export curbs, Red Sea crisis key risks to India's trade: Economic Survey

India's Chief Economic Advisor V Anantha Nageswaran

Geopolitical tensions and export restrictions on food and fertiliser have emerged as key risks to India's rising export of goods and services, the Economic Survey noted on July 22.

"Attacks on shipping in the Red Sea and drought in the Panama Canal have resulted in trade flows being re-routed, increasing journey time and costs. India’s merchandise trade relies heavily on maritime trade, so disturbances in major shipping routes can impact its economy," the survey said, adding that rising protectionism is another risk that could undermine trade recovery in 2024-25.

While, India's merchandise trade deficit narrowed to $20.98 billion in June as against $23.78 billion a month back, exports fell 7.7 percent on a sequential basis.

The survey, presented before the Parliament on July 22, noted that changes in trade policies by major trading partners or geopolitical developments can affect India's export opportunities and market access.

"75 export restrictions on food, feed and fertilisers are still in place globally, in addition to 20 COVID-19-related export restrictions. For 2023, the trade covered by import restrictions in force was estimated at $2,480 billion, representing almost one-tenth of total world imports," it said.

The survey also highlighted fluctuations in commodity prices, especially for critical imports like oil, metals and agricultural products, can impact India's trade balance and inflation levels, adding that more restrictions could push food prices higher.

India must embark on a mix of policies that straddle security concerns with economic considerations, the survey advocated,  highlighting India's push towards manufacturing in niche sectors through Production-Linked Incentive (PLI) scheme and the Make in India initiative.

"On the other hand, India’s edge in services will catalyse our globalisation over the coming years," the survey added.

The focus on product safety and quality consciousness in the private sector and policy stability in the public sector are the obvious starting points to turn the challenges in exports into an opportunity, the survey prescribed.