India's foreign trade crosses USD 800 billion mark in first six months of 2023: GTRI

A healthy growth in India's services segments has helped the country's total exports and imports of goods and services to cross the USD 800 billion mark during the first half of 2023, despite a slowdown in global demand, think tank GTRI said in a report on Monday. According to the analysis of the Global Trade Research Initiative (GTRI), exports of goods and services rose by 1.5 per cent to USD 385.4 billion during January-June this year, as against USD 379.5 billion in January-June 2022.

Imports, however, dipped by 5.9 per cent to USD 415.5 billion during the six months of this year, as against USD 441.7 billion in January-June 2022. "India's foreign trade (exports and imports of merchandise and services) reached USD 800.9 billion during January-June 2023, exhibiting a decline of 2.5 per cent over the same period last year (January-June 2022),” the report said.

Standalone, goods exports dipped by 8.1 per cent to USD 218.7 billion, while imports contracted by 8.3 per cent to USD 325.7 billion. On the other hand, services exports during the six months period grew by 17.7 per cent to USD 166.7 billion, while imports rose by 3.7 per cent to USD 89.8 billion. "Data is showing modest decline due to weak global demand and losing competitiveness in labour intensive sectors. The decline in merchandise exports happened despite appreciating INR (Indian Rupee). INR/USD exchange rate appreciated from 76.16 in April 2022 to 82.18 in Apr 2023," GTRI Co-founder Ajay Srivastava said. He said the world trade outlook for 2023 is weak due to a number of factors, including the ongoing war in Ukraine, high inflation, tighter monetary policy, and financial uncertainty. "But these factors will soon be overshadowed by a spate of new subsidies and protectionist measures by the EU and USA. For example, in the first seven months of 2023 alone, the EU has introduced five regulations on climate change and trade, each of these are essentially measures to curb imports," he said.

India should continue to focus on increasing product quality and supply chain competitiveness, he said, adding since every big country is in the inward mode, India should not surrender its policy space, especially in new issues in FTAs (free trade agreements) and Indo-Pacific Economic Framework for Prosperity (IPEF). He suggested the government be ready to use targeted and precise retaliation to counter unilateral policy decisions like CBAM (carbon border adjustment mechanism) or EU Deforestation Regulation.

India has done this effectively in 2019 by raising tariffs on the US products when the US in 2018 raised tariffs on steel and aluminium, he said. The report stated that 11 of 29 product categories contributing to 25 per cent of India's exports registered positive export growth during January-June 2023, over the same period last year. Those sectors include Telecom, Computer and electronics items; Machinery, boilers, Turbines; Pharmaceuticals; ceramic products. Smartphone exports jumped to USD 7.5 billion during January-June this year from USD 2.5 billion in January-June 2022.
However, exports in 18 of 29 product categories contributing to 75 per cent of total merchandise exports declined during the period and that include cereals, vegetable, fruits, spices; fish, meat; dairy products; textiles, carpets, garments; footwear; and leather.

"Small firms active in labour-intensive sectors face 10-15 cost disadvantages due to high cost of capital, low-quality grid power, delays at the ports and higher compliance cost. PLI is not an answer to product categories where thousands of firms make the same products as it will put non-recipients to a disadvantage,” Srivastava said. He suggested that a horizontal scheme extending 2-3 per cent incentive to every firm in the sector will help in meeting some of the cost disability. Further, the report said that India exports goods to 240 countries and out of that, the country's outbound shipments declined in 134 destinations.

Major countries where exports declined include the USA, UAE, China, Bangladesh, and Germany. Countries where exports grew positively include Netherland, UK, Saudi Arabia. "India's exports exceed USD one billion with 41 countries. India's export promotion must focus on these countries as these countries account for 87 per cent of India's exports. India's exports grew positively in 12 of these countries and declined in 29 countries," he said. During January-June 2023, the top 15 countries with which India has the highest trade deficit include China (USD 38.1 billion), Russia (USD 29.6 billion), Saudi Arabia (USD 12.9 billion), Iraq (USD 12.5 billion) and Switzerland (USD 7.5 billion). Talking about free trade agreements, the report said the share of FTA partners in India's merchandise exports came down from 30.1 per cent in the first six months of 2022 to 26.8 per cent in 2023.

This includes total merchandise exports and not the preferential exports for which data is not in public domain. About oil imports, it said that import of crude petroleum came down from 79.2 billion in January-June 2022 to 73.2 billion in January-June 2023, a decline of 7.6 per cent. "But, Russia's share in India's import of petroleum crude jumped from 6.4 per cent in January-June 2022 to 31.3 per cent in January-June 2023. "Imports increased from USD 5.1 billion to USD 22.9 billion registering a growth of 350 per cent," Srivastava said, adding the share of imports from all other major suppliers like Iraq, Saudi Arabia, UAE has declined substantially during this period.