Declining Indian Exports
28th Jan, 2023
For India’s goods exports in December 2022 has marked the steepest fall in two years, with products worth $34.5 billion shipped out at 12.2% lower than last year rate.
Causes of declining Indian Exports:
- Clouds of recession blowing through Europe and the U.S.
- The COVID-19 situation in China
- A reversion towards protectionism in some markets.
- The Ukraine-Russia conflict
- In general, however, a weaker domestic currency stimulates exports and makes imports more expensive.
- Conversely, a strong domestic currency hampers exports and makes imports cheaper.
- A high base effect also played a role in exaggerating the year-on-year export dip in December.
December 2021 had clocked the second highest exports (worth $39.3 billion) in 2021-22, when India’s goods shipments crossed a record $422 billion. The world’s trade dynamics have been altered since then.
Effect of declining export on Indian economy:
- When there are too many imports coming into a country in relation to its exports it can distort a nation’s balance of tradeand devalue its currency.
- When there are more exports, it means that there is a high level of output from a country's factories and industrial facilities, as well as a greater number of people that are being employed in order to keep these factories in operation.
- When a company is exporting a high level of goods, this also equates to a flow of funds into the country, which stimulates consumer spending and contributes to economic growth.
- The relationship between a nation’s imports and exports and its exchange rate as it acts as a constant feedback loop between international trade and the way a country's currency is valued.
What happens if exports fall in an Economy?
- A healthy economy is one where both exports and imports are experiencing growth.
- If exports are growing, but imports have declined significantly, it may indicate that foreign economies are in better shape than the domestic economy.
- Conversely, if exports fall sharply but imports surge, this may indicate that the domestic economy is faring better than overseas markets.
Efforts for reviving exports:
- Improving access to credit and reducing cost of credit, especially for merchant exporters.
- Interest equalization support to all agricultural exports.
- Increasing budgetary support for marketing and exports related infrastructure.
- Creating a single point interface for customs clearance of import and export goods.
- Simplifying various export incentive schemes:
- Advance Authorisation Scheme (AAS)
- Export Promotion Capital Goods (EPCG)
- Service Exports from India Scheme (SEIS)
- Merchandise Exports from India Scheme (MEIS)