- India’s dynamic foreign trade policy adapts to global uncertainties.
- Despite challenges, services exports surge by 5.93%, enhancing the trade balance.
- Key sectors show growth, and the upcoming year tests ambitious export goals.
In a strategic move, the Central government altered India’s foreign trade policy (FTP) regime on March 31, 2023, bidding farewell to the traditional five-year FTP term. As uncertainties in global trade persist, the newly adopted dynamic FTP aims to adapt to the rapidly evolving trends in the international trade landscape.
Current Global Trade Scenario
As 2023 concludes, global trade faces challenges, evident in the World Trade Organisation’s (WTO) revised projections, indicating a slowdown in merchandise trade growth. However, India’s overall exports (Merchandise and Services) show resilience amid global headwinds. The country’s export performance aligns with the worldwide trend, reflecting the impact of geopolitical dynamics, such as the Russia-Ukraine war.
Trade Trends and UNCTAD Analysis
UNCTAD’s assessment of India’s trade trends reveals a decline in goods exports but a significant 20% growth in services exports, making India the second-highest growing country in this segment. This growth, coupled with the China+1 strategy, provides opportunities for India to increase exports to the US. However, geopolitical trends and declining interdependence between major economies pose challenges to global trade, resonating with India’s experiences.
Services Exports Resilience
Despite global uncertainties, services exports from India exhibit a commendable 5.93% growth during April-November 2023. Notably, the country’s trade deficit sees improvement, primarily driven by the robust performance of services exports. The decline in overall trade deficit and merchandise trade deficit underscores the positive impact of services on India’s trade balance.
Key Sectors and Trade Balance
Examining specific sectors, certain key areas experience positive growth in merchandise exports, including iron ore, oil meals, and electronic goods. The production linked incentive (PLI) scheme for electronic goods, especially mobile phones, proves successful. However, merchandise imports show negative growth in sectors such as cotton raw & waste, silver, and fertilizers.
Challenges in the Year Ahead
Looking ahead, the immediate future poses challenges, with substantial economic disparities among countries influencing trade patterns. UNCTAD emphasizes the hindrances posed by high interest rates, regional conflicts, and geopolitical tensions on economic activity. The importance of securing critical minerals for the energy transition adds another layer of complexity to market volatility.
WTO’s Outlook for 2024
WTO forecasts a global trade growth pickup to 3.3% in 2024, with Asia expected to be the fastest-growing region. This positive outlook provides a backdrop for India as it enters 2024, testing the effectiveness of its new FTP. The policy aims to promote exports through collaboration, ease of doing business, and export-friendly initiatives, setting a goal to reach $2 trillion in exports by 2030.
India’s Strategy and Challenges Ahead
To achieve this ambitious target, India’s FTP 2023 focuses on supporting emerging areas, E-commerce, district development as export hubs, and schemes like “Towns of Export Excellence” and “Status Holder.” The government may also revisit current export restrictions on certain commodities. FIEO emphasizes the need for credit support, marketing assistance, and the extension of initiatives like ECLGS.
As India strives to become a major player in global trade, the resilience of its trade ecosystem will be tested in the upcoming year. The dynamic FTP, coupled with proactive measures and collaborations, aims to navigate the changing dynamics of international trade and propel India towards its ambitious export goals.
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Source: Fortune India
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