Mixed bag: about Indian merchandise exports

Restoring the health of each constituent sector is a necessity for long-term export growth

India’s merchandise exports hit an unprecedented quarterly high of $ 95 billion in the three months ended June, boosting the economy. The fact that the record was broken in a quarter when the second wave of the pandemic peaked, and in the midst of varying degrees of lockdown, is all the more remarkable. Last month, exports jumped 47% from June 2020 to $ 32.5 billion. Even ignoring the fact that the period of the previous year had provided an anomalous base as the economy had just started to reopen after a prolonged nationwide lockdown, the growth in shipments was still 30% from the pre-pandemic. June 2019. Propelling the push from 2019 levels, non-rice grains quadrupled; iron ore, which has more than doubled; and organic and inorganic chemicals which increased by 62%. Exports of engineering goods saw the largest increase in dollar terms, adding $ 2.73 billion in value, or 42% from June 2019, as rising immunization coverage and economic recovery in major developed markets, including the EU and the US, have strengthened demand. Trade and Industry Minister Piyush Goyal was excited enough about the export performance to postulate that merchandise shipments to overseas markets could hit $ 400 billion this fiscal year, a figure that , if achieved, would represent an annual record.

Trade data shows, however, that a major driver of export growth has been the surge in commodity prices which have benefited from the accelerated reopening of major economies, as well as an increased appetite for commodities and grains. in China. On the other hand, crucial and job-creating export sectors, including ready-made garments, leather and leather products, and tea, all posted double-digit declines from June 2019 levels, reflecting the deeper structural issues that haunt each of them. While the tea industry has faced a long-term downtrend exacerbated by inadequate product variety, lack of marketing, and fierce competition from competitors such as Sri Lanka and Kenya, the tea segment leather goods were put on the ropes by a combination of shorts. lucid political measures, the withdrawal of export incentives imposed by the WTO and a slowdown in orders induced by the pandemic. For a segment that provides employment on a large scale, the recent imposition of an import duty on a key raw material has called into question the very viability of the sector. While the government is slow to communicate the applicable rates under the Remission scheme for duties and taxes on export products (RoDTEP), exporters still do not know how to price their products when bidding on orders. A shortage of containers and increased congestion have also pushed up freight rates out of Indian ports. Policymakers must look beyond the headlines and accelerate action to restore the health of each constituent sector if long-term economic growth in exports is to be guaranteed.