India plans to curb trade deficit

Recently, the Union government has informed that India is looking to cut down on cheap and non-essential imports through quality control orders (QCOs), as well as substitute imports through local production by incentivising manufacturers through Production linked Incentives (PLI) schemes.

• India’s goods exports declined for the second successive month in March, falling a sharp 13.9% while imports dipped 7.9%.
• Total goods exports in 2022-23 rose 6.03%, while the import bill surged by a steeper 16.5%.
• The Commerce and Industry Ministry pegged the total trade deficit for the year, 46% higher than the gap in 2021-22.

Products-wise data for Exports:

• The top three of India’s five export items registered insignificant growth including Rice (up 1.5%), chemicals (1%), and drugs and pharmaceuticals (0.8%).
• Petroleum exports now account for 21.1% of total exports, up from 16% in 2021-22.
• Engineering goods declined by 5.1%.

• Non-oil exports too contracted 0.5%, and goods shipments were also seen 2.8% lower than 2021-22 (excluding electronics exports).

Country-wise export data:

• The USA remained India’s top export destination, followed by UAE.
• Netherlands emerged as the third largest goods buyer, displacing China to the fourth position in 2022-23.
• Bangladesh and Hong Kong remained in India’s top 10 export markets.

Most Exported Products from India:

• Leather and Its Products: Indian leather manufactures items such as purses, coats, cricket balls, shoes, jackets, and more.
• Petroleum Products: Petroleum products like Petrol, diesel, gasoline, jet fuel and LPG are very demanding in countries like the US, China, and the Netherlands.
• Gems and Jewellery: India is the world’s fifth-largest exporter of such materials. And because of that, India owns almost 6% of shares in global exports.
• Automobiles and Equipment: India is a rich country in terms of iron and steel. Due to this, India is a leading exporting country of machinery, parts, and, most importantly, automobiles.
• Pharmaceutical Products: Some of the most exported products include active ingredients, biopharmaceuticals, and finished drugs. India was also an active exporter of the covid vaccines in 2020-21.  
• Electronic Goods: Mobiles, laptops, computers, and other electronic accessories are always in increasing demand, and India has been fulfilling it for multiple countries for a long time.
• Dairy Products: India primarily is an agricultural state, which is why the dairy and agricultural exports in India are popular across the globe. 
• Cereal (Rice, wheat etc.): Much like China and Ukraine, India is famous for its abundant amount of production of wheat and maida. 

Rise in Imports:

• China’s share of goods imports dipped to 13.8% in the year gone by from 15.4% in 2021-22.

• While petroleum imports jumped about 30% to nearly $210 billion in 2022-23.
• Coal imports grew at a faster 57% to touch almost $50 billion.
• Gold imports, on the other hand, fell around 24% as global prices for the metal surged and the Rupee turned weaker.

Implications:

• As the present situation is giving rise to more imports than exports for India, it can lead to Trade deficit for the economy.
• Inflation
• Rise in Bank rates
• Increase in price of commodities

Government interventions:

The Government has taken the following measures to boost exports and reduce trade deficit:

• Foreign Trade Policy (2015-20) extended up to 31-03-2023.
• Interest Equalization Scheme on pre and post shipment rupee export credit has also been extended up to 31-03-2024.
• Assistance provided through several schemes to promote exports, namely, Trade Infrastructure for Export Scheme (TIES) and Market Access Initiatives (MAI) Scheme.
• Rebate of State and Central Levies and Taxes (RoSCTL) Scheme to promote labour oriented textile export has been implemented since 07.03.2019.
• Remission of Duties and Taxes on Exported Products (RoDTEP) scheme has been implemented since 01.01.2021.
• Common Digital Platform for Certificate of Origin has been launched to facilitate trade and increase Free Trade Agreement (FTA) utilization by exporters.
• Districts as Export Hubs has been launched by identifying products with export potential in each district, addressing bottlenecks for exporting these products and supporting local exporters/manufacturers to generate employment in the district.
• Package announced in light of the COVID pandemic to support domestic industry through various banking and financial sector relief measures, especially for MSMEs, which constitute a major share in exports.