Gains from trade

News: Preliminary data from Ministry of commerce and Industry shows an increase in exports and imports over the pre-pandemic level. 

What are the indications of a positive momentum in India’s export and imports? 

Exports:  

– Merchandise exports rose to $37.3 billion in December 2021, recording a growth of 37% over last year, and a similar increase over the pre-pandemic levels 

– The mark of exports worth $300 billion has been achieved in the first nine months alone, which was the amount of exports trade for the whole year in 2019 (Pre pandemic). 

– Increase of almost 25% over the pre-pandemic levels in exports. This growth is observed across product categories from engineering and electronic goods to textiles. 

Imports: 

– Imports have risen by almost 22% over the 2019 levels, leading to a widening of the trade deficit. The surge in imports was led by electronic goods, machinery and chemicals, which suggests a broad-basing of demand. 

How is the global trade scenario currently like? 

According to a report by UNCTAD, the value of global trade in goods is about 15% higher than before Covid struck,  

– Trade in services is yet to recover to earlier levels.  

– This means that the global trade has surpassed its pre-pandemic levels.   

What are the current government policies to promote India’s share in global trade? 

– Trade agreements with the EU, Australia, UK and UAE, among others, are being worked upon with greater urgency. 

– Government is also focussing on gaining access to markets for textile products through free trade agreements. 

– The upcoming Union budget is also expected to focus more heavily on trade-related packages.  

What is the way forward? 

Govt should try to build on this momentum, which will help India to increase its share in global trade. This can be done if it reorients its broader trade policy. 

Govt should further seek greater integration with global supply chains. This can be done by forging FTAs, moving away from protectionism, bringing down tariffs, and pushing for reforms that boost export competitiveness. 

Source: This post is based on the article “Gains from trade” published in The Indian express on 6^th Jan 2022.