At the beginning of this fiscal, the Centre had set a merchandise export target of $400 billion for FY22, which at the time seemed ambitious. After all, our FY21 exports fell 7.3% to $290 billion from $313 billion the previous year.
The fall was mainly due to a sharp drop in exports of petroleum products as Covid-19 lockdowns curbed transportation activities and hurt the demand for fuel.
Even if we consider FY21 as an oddity due to lockdowns around the world, India’s exports put up an impressive show this fiscal. From April to November this year, they are up 51% to $263 billion and set to cross last year’s numbers by December.
The rise in India’s exports could be attributed largely to the growth momentum in advanced economies and the resultant increase in global import demand.
The depreciating rupee has come as a blessing in disguise as it makes Indian goods from labour-intensive sectors like textiles and clothing more competitive globally.
India is also aggressively negotiating free trade agreements with the European Union, Australia, the UAE, the UK and the Gulf Cooperation Council. Any such deals materialising in the next few months will ensure greater access for Indian goods.
The recently introduced PLI schemes will also support growth particularly in mobile, electronics and pharma sectors as incremental production will push additional exports as well.
Further, the government has introduced export incentive schemes and cleared some pending tax refunds to exporters to improve their liquidity.
To give us insight on whether India’s export growth can sustain at this rate, we have with us professor Amita Batra of Jawaharlal Nehru University.
Considering all these factors, can the export momentum spill over to the next fiscal? The answer comes with several caveats
Global demand will depend on whether the countries would be able to contain Covid-19 and the new Omicron variant.
Another key obstacle is the container shortage and high freight rates.
With increasing Indian imports and China’s export growth slowing down, the container shortage has eased slightly in India but freight costs are still nowhere near pre-pandemic times. The average container prices at Chennai and Mumbai ports are still about 150% higher than 2019 levels. Exporters have in fact asked the government for freight support.
Further, India Ratings and Research opined that it will not be easy to maintain the current export growth momentum, as the stimulus-induced demand in developed economies might normalise in 2022 and it could tilt back in favour of services.
India is doing all it can to provide an impetus to outbound shipments but things that are out of its control threaten to put brakes on the export party.
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 "What is the road ahead for Indian exports; will momentum continue?")
