Slowing global demand is weighing on India's merchandise exports, noted the Economic Survey 2022-23 presented by Finance Minister Nirmala Sitharaman on Tuesday.
The empirical literature documents that global growth exerts a strong statistically and economically significant impact on India's real exports, though the impact has reduced over the years.
Global growth is forecast to slow down in 2022 and 2023 as per IMF estimates. This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the Covid-19 pandemic. "Thus, the export outlook may remain flat in the coming year if global growth does not pick up in 2023, as indicated by many forecasts," the Survey said.
"In such cases, product basket and destination diversification which India is taking through FTAs would be useful to enhance trade opportunities. At times when the base (global growth and global trade) is not growing, export growth will have to come predominantly through market share gains," it added.
"In turn, that comes from the focus on efficiency, productivity, technology, and innovation. That game has to be lifted. Governments can try and open markets through FTAs. But, to take advantage of that is in the hands of private sector participants."
The Survey noted that India is facing competition from South Asian countries in a few of its export competitive products. In the textile sector, Bangladesh and Vietnam are seen to be expanding their exports globally, in recent years.
Further, Vietnam has been able to expand its exports in machinery and equipment; computers, electronic products, and certain agriculture products among others. "However, given the benefits of the lower average age of the working population along with the advantage of economies of scale, India has the potential to cater to the global demand for several products in a cost-effective manner."
On the imports side, notwithstanding uncertainty surrounding the outlook on global crude oil prices, "the recent softening in its prices augurs well for India's POL imports. However, non-oil, non-gold imports, which are growth-sensitive, may not witness a significant slowdown as Indian growth continues to be resilient", the Survey asserted.
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