This financial year started on a slow note. India’s merchandise exports grew by just one per cent in April compared to the same month last year – around $35 billion (Rs 2.92 lakh crore). The ongoing war between Russia-Ukraine as well as other political tensions such as the Red Sea crisis and the Israel-Hamas conflict have made the international trade scenario much more difficult for Indian exporters.
Despite all this, traders are hopeful that with the improvement in demand in the European Union, UK, West Asia and America, better export growth figures will start coming. The Federation of Indian Export Organisations (FIEO) claims that order bookings from these regions are 10 per cent higher, which is a sign of improvement for labour-intensive sectors including leather and leather products, footwear and apparel.
Experts believe that the tariff war between the US and China could also open up new opportunities for the Indian export sector. However, there is a dire need to increase commercial exports. India’s total exports grew marginally to $778 billion (Rs 64.99 lakh crore) in FY24 from $776.3 billion (Rs 64.85 lakh crore) last year.
But merchandise exports, which account for a large share of this, declined by about three per cent and fell from $451 billion (Rs 37.63 lakh crore) to $437 billion (Rs 36.46 lakh crore). In comparison, services exports did better, growing by about 5 per cent and acting as a driver of export growth.
A comprehensive roadmap to boost merchandise exports with a target of $1 billion by 2030 is expected to have a strategy to address this major concern. Another important area that needs attention is the free trade agreement (FTA) with Oman. Negotiations for this agreement have been completed this year.
The signing of the FTA with the United Kingdom (UK) may be delayed as it is going to hold elections in July. Negotiations for similar agreements with the European Union and Peru may continue while negotiations with the South African Customs Union (SACU), Chile and the Gulf Cooperation Council (GCC) are scheduled in the next few months.
expert opinion
Ajay Sahai
Director General-CEO, Federation
of Indian Export Organisation
“Amid the Red Sea crisis and global economic slowdown, the demand for credit has increased among exporters due to the rising prices of commodities and freight. The ministry should pay attention to this”
Who is responsible for this?
Piyush Goyal, 59 years: BJP
Minister of Commerce and Industry
Popular mandate – The former investment banker contested the Lok Sabha elections for the first time this time and won from Mumbai North by a margin of 3,50,000 votes. He was the BJP’s floor leader in the Rajya Sabha since 2021.
capable administrator – Goyal served in several ministries in the last two governments but it was the Commerce and Industry Ministry that brought him to prominence. Known for his affable nature, Goyal oversaw the rise of exports to a record $778 billion in FY24 and the signing of a historic agreement with the European Free Trade Association this year.
state Minister
Jitin Prasad,
50 years: BJP
This former Congressman has won the Pilibhit seat in Uttar Pradesh and returned as a minister in the central government after 10 years
What needs to be done
Dealing with a money crunch – In such a challenging environment, exporters will have to solve both the problems of credit flow and cost of credit. Due to global slowdown and geopolitical tensions, commodity prices and freight have increased, while customers are also taking more time for payment. Exporters need more amount of credit and that too for longer period.
Extension of interest relief – At a time when interest rates in India are much higher than in competing economies, providing affordable credit to eligible businesses is one of the most effective ways to remove the cost barrier to Indian exports. When overall interest rates came down, the Centre also reduced the interest subsidy for exporters. Now that the repo rates have risen to 6.5 per cent, the subsidy rates should also be brought back to the old levels—5 per cent for MSMEs and 3 per cent for labour-intensive sectors—so that exporters can enter into long-term deals.
Better marketing facilities – Small and medium enterprises do not have the funds to showcase themselves globally. The total marketing support fund is currently a meagre Rs 200 crore, which is nowhere near the 0.5 per cent of total exports that businesses demand. With exports of around $800 billion (Rs 66.83 lakh crore), $4 billion (Rs 33,400 crore) needs to be set aside for marketing.
business contact – In January, Piyush Goyal announced an initiative to work on an e-platform to help connect Indian exporters with international buyers. A welcome move, the Trade Connect platform should be launched soon.
Finalization of FTA – In the first 100 days of Modi 3.0, India is expected to sign a free trade agreement with Oman. Other FTAs including with the UK, Peru and the Russian-led Eurasia and European Union also need to be worked out soon. The last of these FTAs will give India access to the markets of five resource-rich post-Soviet economies.