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News: The year 2021 was a record one for trade despite the pandemic. The world merchandise trade volume grew at twice the rate of world GDP at market exchange rates in the two decades before the global financial crisis.
According to the WTO, the World merchandise trade volume is expected to grow at 3% in 2022 and 3.4% in 2023.
Status of India’s exports
India has had a good export run in line with global trends. India witnessed record goods exports of $419 billion, while touching $250 billion in services exports.
What are the new opportunities?
The exporters (including Indian) look to tap into newer agricultural commodity export opportunities. Ukraine and Sri Lanka which are major exporters of agricultural products are having limited presence in global trade.
The new opportunities will spur overall exports and will also help to support the recovery of the agrarian economy through higher realisations.
The food security in Europe and Africa depends on wheat supplies from Russia and Ukraine. Therefore, India has new opportunities for wheat export in these new markets and supplies have been disrupted.
Sri Lanka (the largest producer of tea) is a major player in the global tea market. Almost 98 per cent of its annual production is exported. Sri Lanka is a major player in textile export. However prolonged power cuts in the island nation will hurt its production and export capacity.
India has newer export opportunities in tea and textile export.
In addition, major global garments brands such as Zara and H&M have been reportedly looking towards India. Chinese factories are locked up due to a Covid surge and the Asian exporters like Bangladesh, Vietnam and Cambodia lack the capacity to fill the void. Therefore, India can seize this opportunity.
What are the challenges?
The ratio between trade and GDP growth may fall to 1.1:1 in 2022 and 2023 due to slower global growth, an adverse geopolitical environment, the shadow of recurring waves of the pandemic and prolonged supply chain issues.
Measures to tap export opportunities in developed markets
One, the government should work on non-tariff barriers for agricultural trade with a special focus on harmonising the sanitary and phytosanitary (SPS) requirements. The government should implement sector-specific measures and strengthen the traceability system in supply chains.
Two, to support tea exports, traditional tea boards should be given greater role and autonomy for optimising the development, promotion, and research in the sector. The proposed Tea Promotion and Development Act should be implemented.
Three, India must integrate with global supply chains. A slew of trade deals. and a new pro-trade policy should work in this direction.
Four, tariff rates for intermediate inputs should be reduced to either zero or should be negligible for India. It will make India an attractive location for assembly activities.
Five, India should create an enabling ecosystem that realigns its specialisation patterns towards labour-intensive processes and product lines. The labour market reforms must be taken.
Six, a continuous and pro-active FDI policy is critical. The foreign capital and technology transfer enables entry of local firms into global production networks. The local firms play a role as subcontractors and suppliers of intermediate inputs to MNEs.
Seventh, the issue of logistical bottlenecks should be taken care of by the government. The Economic Survey 2019 had recommended that low levels of service link costs (costs related to transportation, communication, etc) are prerequisites to strengthen their participation in GVCs.
Source: The post is based on an article “India must seize the trade opportunity opening now” published in the Indian Express on 06th May 2022.
