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Declining Indian Exports

  • Category
    Economy
  • Published
    28th Jan, 2023

Context

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)
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