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News: Last week, it was announced by the Union government that merchandise exports from India have crossed $400 billion in the current financial year 2021-22.
What is remarkable about this achievement?
One, the value of exports in the year 2021-22 is far higher than the previous record of $330 billion that was achieved in fiscal year 2018-19.
Two, this achievement has been recorded despite the occurrence of two waves of the Covid pandemic in the year 2021-22
What are the reasons behind a boom in India’s exports?
Govt’s role: The government had set specific exports targets that were crafted country-wise, product-wise & EPC-wise (Export Promotion Council). It further monitored the execution of plans and also did course correction for the achievement of the export target”.
Overall improvement in global economic growth rate: This created demand for Indian goods in other countries.
Abundant money supply in the global economy: There was availability of easy money in the global economy. It was due to massive government spending and easy availability of the cheap credit by the Central Banks.
India has also been able to achieve the target of $400billion export value due to higher prices. In fact, India’s merchandise exports as a percentage of the GDP are far from where they were a decade ago.
What are the upcoming challenges?
Most central banks in the Western countries are winding down their balance sheets, i.e. they are raising interest rates in a bid to contain inflation levels that are at multi-decade highs.
Russia’s invasion of Ukraine will cause India to face inflationary pressure in the coming days
Due to the pandemic, more and more countries are wanting to become self-sufficient. They are reducing their dependence on foreign goods. It is going to hit globalization and the merchandise trade.
What is the way forward?
The government is required to revisit its policies to raise the competitiveness of the exporters.
Source: The post is based on an article “India hit $400billion in exports are changing” published in the Indian Express on 28th March 2022.
