Private consumption, government spending, investment, and exports fuel India’s GDP. While over-all private consumption & private investment has been less than what we’ve hoped for thus far, India’s exports and govt spending have done some of the heavy lifting for the GDP number.
India’s exports have risen for four consecutive quarters, with a number of key items seeing strong growth in outbound shipments when compared to pre-pandemic levels.
In this article we look at some of the export related figures and try and analyse the reasons for the stand-pit growth.
July export figures at $ 35 billion which is the highest ever export for a month. We are talking about Merchandize exports.
June exports was excellent too. Merchandize exports stood at $ 32.46 billion. Let’s compare this with 2019 figures which was $25.03 billion. An increase of 30%! We are talking of 2019 because we experienced a country wide lockdown in 2020 in which all merchandize activities were disrupted.
Let’s come to quarterly figures – April, May and June 2021, the first quarter of 2021-22. The export figure for this quarter is $ 95 billion – a record for any quarter in the history of India merchandize export. It is higher than the earlier record of $ 90 billion in the 4th quarter of 2020-21.
India’s best yearly exports have been $ 330 billion in 2018-19.
The Government’s target in 2021-22 is $ 400 billion.
Now let’s compare the growth of exports with corresponding growth of the world’s developed economies like Japan, US, UK etc. You will find a stand-out increase in percentage points. EU’s exports grew by 12% over the figures of April 2020. Japan recorded a growth of 10% while Korea an increase of 5%, UK remained flat, and USA stood at 7%. Compare this with India’s increase of 18%. And mind you, these are figures till April 2021. We are not considering the months of May, June and July which are stand out months for India.
Arunasset tries to analyze the reasons for this stand-out growth.
- Rebound in the demand for goods in the global market as lax money policies and the vaccination program gets traction across the world. And, as global trade activities gain momentum India’s exports could see continued increase unless Covid throws up more unpleasant surprises.
- The fact that many countries are rebalancing their China exposure by sourcing from other countries is helping this boost.
- A spike in oil exports boosted the merchandize exports to a record high in July 2021.
- If this oil export is sustained then we could see a significant boost in merchandize exports going forward.
The top five commodity groups that India exported most in July 2021 are:
- Petroleum products (an increase of 215%)
- Gems & jewelry (an increase of 130%)
- Other cereals (an increase of 70%)
- Man-made yarn & fabrics (an increase of 58%)
- Cotton yarn and fabrics (an increase of 48%)
The maximum increase in exports by value were to the US (by $6.76 billion), the UAE (by $ 2.4 billion) and Belgium (by $826 million)
The reason for this spurt is the sector specific intervention by the Government, involvement of all the stake holders and functioning of the Government. These include:
- Simplification of procedures including extension of timelines and licenses.
- To improve the ease of doing business and reduce the compliance burden, 6,426 compliances have been reduced.
- The National Single Window System is a one stop digital platform to obtain clearances & approvals.
- Several more measures are in the pipeline to transform India into an export led economy and become an exporter and manufacturing hub for the world – a position that China enjoys at the moment.
At present India’s exports of goods and services as percentage of GDP is 18.41%. The years from 2003 to 2007 witnessed maximum contribution from exports. During this period export contribution to GDP was close to 25% at its peak. Every time India’s GDP has grown above 7% in a sustained manner, contribution of exports to GDP has been around 20%.