Tripping trade – India must not excessively rely on a few large markets

Source: The post is based on the article “Tripping trade – India must not excessively rely on a few large markets” published in the Indian Express on 17th May 2023.

Syllabus: GS 3 – Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Relevance: About the reduction in India’s imports and exports.

News: This March exports had hit a nine-month high of nearly $42 billion while imports were $60 billion. But, goods exports declined to $34.6 billion in April, the lowest since last October. Imports in April shrank by a sharper 14% which is a 15-month low of under $50 billion.

Note: The new Foreign Trade Policy enunciated a two trillion-dollar export goal to be achieved in seven years.

What are the various reasons for the reduction in India’s imports and exports?

a) Slowing global economy, b) Falling imports indicate a reduction in domestic demand, c) If imports of petroleum (down 14%), and gems and jewellery are down, then the associated value-added end products export will also come down, d) Other job creators such as textiles is also facing hardships.

What is the status of global economies at present?

WTO forecasted a global trade growth hike (from 1% to 1.7%) for 2023. This might be because of China’s opening up of the economy. However, the recent Chinese data have been disappointing regarding recovery momentum.

European and North American markets are expected to speed up goods orders. But the services exports may not speed up.

What India should do?

India must use this slack period to review its overall trade stance. India should a) assess its excessive reliance on a few large markets, and b) pursue greater integration with global value chains and multilateral trading arrangements.