Resilience refers to the ability of individuals, communities or systems to effectively adapt to and bounce back from adversity, trauma or stress. Resilience also often encompasses qualities like flexibility, perseverance, optimism and the capacity to learn and grow from experiences of hardship. It is not just about enduring difficulties, but also about thriving despite them. The story of Indian foreign trade during the last five years is all about resilience.
At a time when the WTO has lowered the global trade growth forecast to only 0.8% this year, down from the 1.7% forecast in April, India’s share in global exports is poised to sharply rise from 1.8% in 2022 to 4.5% by 2031, according to a recent Morgan Stanley report. No wonder, India’s exports in January 2024 are estimated to be $69.72 billion, a growth of 9.28% over January 2023. Imports in January 2024 are estimated to be $70.46 billion, a growth of 4.15% over January 2023.
To judge India’s trade performance just in numbers or some comparative charts would be unfair, as they would never be able to tell the story of the odds we were pitted against. Like the collective national fightback against Covid or an epic run chase at fortress Gabba in Brisbane by a battered, bruised and depleted Indian cricket team, India’s foreign trade stands tall and proud amid global geo-economic storms and political headwinds.
Notwithstanding the economic slump in Europe and other developing countries due to post-pandemic supply-chain disruptions, the Russia-Ukraine war, the Israel-Hamas conflict, geopolitical tensions between the US and China, and post-Brexit economic woes in the UK, India’s export performance in the last few fiscals is highly commendable.
Several factors have contributed to this performance. The resilience in the face of external shocks has come from diversifying trade partners, increasing export variety, policy reforms, strong domestic demand, and robust economic fundamentals that include a large and youthful workforce, expanding middle class, and vibrant entrepreneurial ecosystem.
While the current challenges to trade growth have been handled exceptionally well, the future seems to be secure too. Union commerce minister Piyush Goyal has gone on record saying that India under Prime Minister Modi is working towards making India a $35-trillion economy in the next 25 years from the current $3.5 trillion, along with taking care of India’s heritage. Driven by this mission, the minister has often expressed his resolve to increase India’s exports to $2 trillion by 2030.
Diversified trade partners
India has diversified its trade relationships, reducing dependence on any single market. This helps mitigate risks from economic downturns or geopolitical tensions in specific regions. The world today wants to engage with India for free trade agreements (FTAs) and to expand trade and diplomatic relations. Some of them like the UAE, Mauritius and Australia have been signed FTAs, and while some others are in advanced stages of being concluded. Gulf Cooperation Council countries, South American countries, Africa, EU and Southeast Asia — all these regions are showing faith in special trading relationships with India and in Indian supply chains. While the traditional big trading partners have been retained, new areas have opened up, risks hedged.
Export diversity
India today exports a wide range of goods and services. From being an exporter of primary products, agricultural commodities, and gems and jewellery for many decades, India’s export mix has now a significant component of petroleum products, engineering goods, automobiles, pharmaceuticals, chemicals, steel and textiles. This diverse base helps cushion the impact of market fluctuations in any sector.
Policy reforms
India’s strides in exports did not happen by accident—it was the result of policy reforms and interventions to create a conducive ecosystem. The reforms include simplifying trade procedures, improving infrastructure and reducing regulatory barriers. In 2023, India brought out a trade policy moves away from earlier policies’ five-year regimes; it focuses more on continuity with in-built feedback mechanisms to adapt to new challenges and respond faster to emerging headwinds.
Export facilitation schemes such as a market access initiative, remission of duties and tax on exported products or RoDTEP, a trade infrastructure for exports scheme and an interest equalisation scheme on pre- and post-shipment rupee credit have played key roles. With an outlay of over `2 lakh crore for 14 manufacturing sectors, the production-linked incentive scheme has been a game-changer in transforming India as a manufacturing hub and making exports more competitive.
Despite the immense will of the nation to continue marching ahead, India faces challenges in maintaining its trade resilience, including infrastructure bottlenecks and geopolitical uncertainties. Continued efforts to address these challenges and diversify and strengthen its economy will be essential for India to enhance its resilience in an increasingly interconnected global economy.
D J Narain
Chairman & co-founder, Kalaclap Technologies