India’s merchandise exports have achieved a remarkable landmark by surpassing the $400 Billion marks for the first time in current Financial Year. This is significantly higher than the previous high of $330 billion in Fy2019.This does call for celebration and satisfaction. The continuation of pandemic for nearly two years not only affected our domestic growth but also exports. In the last fiscal our merchandise exports, like our GDP, went down. So, it marks a kind of rebound after a 7 per cent decline.

The growth this year can be attributed to, inter alia, a stellar performance by sectors like engineering goods, electronics, gems jewelry, chemicals and petroleum products. All these sectors have benefitted from a strong global recovery. Besides the export basket was widened to farm produce with India emerging as a major supplier of food or essential agriculture products. Liquidity measures announced by the govt for MSMEs, which contribute for over 40 percent of exports; especially the (ECLGS) emergency credit line guarantee schemes came to the rescue of  export-oriented units and MSME sector in general in a big way by helping them deal with their working capital bottlenecks. Undoubtedly a sustained robust growth in merchandise exports can go a long way to provide the much-needed fillip to the Indian economy.

A boom in exports is undoubtedly a remarkable achievement. Our states have also started playing a more active role on this front in boosting exports. To continue the success story, we need to critically introspect what brought us to this comfort zone and what challenges lie ahead. Much of the upswing is a consequence of the global economic recovery. Things were indeed looking up and the whole world was looking forward to a long phase of peace and prosperity post pandemic. But that was not to be. The story has become a bit shaky post Ukraine crisis. Russia’s invasion of Ukraine has changed the geo political environment raising questions over sustainability of such growth. India has benefitted from the rebound in US and EU economies with higher demands for Indian goods. The western market resistance to Chinese goods also helped India. Even as India will continue to have this advantage of western countries remaining away from Chinese goods the geo political changes have brought some uncertainties. Apart from this the on-going war has already started its adverse impact on the oil front. This is going to worsen our trade deficit and further widen the current account deficit. The international oil prices are likely to remain elevated. As per latest information made available by govt sources while we are likely to end up with merchandise exports of over $410 billion this fiscal India’s merchandise imports, thanks to increase in oil prices, is likely to be over$600 billion. The Ukraine crises has also affected global supply chain and likely to pose fresh risks to Indian exporters. Shipping costs have gone up across the countries.

We are a huge country; a country of 1.40 billion people; more than the whole of Europe and USA. In fact, if the population of whole of south America is also added we will stand near to the aggregate population of all these three distinct geographical entities. So, although we should make all efforts to sustain the growth in exports perhaps, we cannot exclusively depend on export led   growth. We are not a Hongkong, Taiwan or Singapore where export led growth did happen in the Post World War II period. We are huge country. The principal drivers of growth will continue to be domestic demand and investments; especially govt investment to make the growth more inclusive. It again depends on the ability of the govt to spend on projects with high potential on employment generation. This automatically will push domestic demands. With removal of the supply bottlenecks, we can be back in the high growth trajectory once again. Exports can play a subsidiary yet very important role. If we are able to maintain the present tempo and consolidate the gains our trade/current account deficits can be put on check. As is well known a current account deficit in international trade has a repercussion on domestic fiscal deficit.

Moreover, while the latest exports numbers are very encouraging this will only raise India’s share in the global merchandise exports from just 1.6 percent in 2020 and 1.7 percent in the pre pandemic year of 2018.Therefore a sustained surge in exports for a few years will be crucial for India to regain its lost glory in global trade. We have a negligible market share by every standard. With the Chinese goods at a disadvantage in the west we need to increase the competitiveness. We must also seek deeper integration with global value chains. In order to do that we also need to look closely at the import tariff side which of late has seen sustained increase in the recent past.