Economic Survey 2023 : Exports show resilience during FY’23 on the back of record levels of Export in FY’22

• INDIA’S OVERALLEXPORT INAPRIL-DECEMBER 2022 EXHIBITEDAPOSITIVE GROWTH OF 16% IN DOLLAR TERMS OVER THE SAME PERIOD LASTYEAR

• VARIOUS EXPORT PROMOTION MEASURES INITIATED TO NURTURE THE INHERENT COMPARATIVEADVANTAGE OF INDIAN EXPORTS

• REVIVALOF ECONOMICACTIVITYCONTRIBUTED TO INCREASE IN INDIAN IMPORTS

• CURRENTACCOUNT DEFICIT EXPECTED TO BE WITHIN SUSTAINABLE LIMITS IN FY’23

• RATIO OF EXTERNALDEBT TO GDPAT COMFORTABLE LEVELS

• FOREX RESERVES STOODAT US$ 562.7 BILLIONAT THE END OF DECEMBER’22

Cont’d. from Pg. 3

These manifested in terms of elevated though now easingglobalcommodityprices,heighteningInternational financial market volatility, reversal of capital flows, capital depreciation and looming slowdown in global growthandtrade.

The Economic Survey highlights that during FY23 (till December2022)India’sexportsdisplayedresilienceonthe back of record levels of exports in FY22. Petroleum products, gems & jewellery, organic & inorganic chemicals, drugs & pharmaceuticals were among the leading export items. However, the slowdown in Indian exports is inevitable in a slowing global economy, characterised by slowing global trade. The Survey says that recognising the key role exports play in improving the resilience of the external sector, from a medium to longterm perspective, various export promotion measures are being considered/implemented. These measures would nurture the inherent comparative advantage that Indian exportsembody.

The Economic Survey mentioned that National Logistics Policy would ease the domestic frictions to encourage Indian exports by reducing the cost of internal logistics. It also says thatthelatestFreeTradeAgreements,suchaswithUAEand Australia, would address the external frictions by creating opportunitiesforexportsatconcessionaltariffsandnon-tariff barriers. Thus, the whole ecosystem would evolve in an export-friendlymannerovertime.

The Economic Survey observes that apart from the elevated crude oil prices, the revival of economic activity contributed to an increase in imports. Petroleum, crude & products; electronic goods; coal, coke & briquettes, etc.; machinery, electrical & non-electrical and gold were among the top import items. It mentions that while continued softening of the global commodity price outlook would assist moderate imports going forward, non-gold, non-oilimportsmaynotdeceleratesignificantly.

The Survey states that India achieved an all-time high annual merchandise export of US$ 422 billion in FY’22. Merchandise export were US$ 332 billion over AprilDecember 2022 against US$ 305 billion during the period April-December 2021. Significant strides in exports were registeredindrugsandpharmaceuticals,electronicgoods andorganicandinorganicchemicalssectorinFY’22.India maintained its dominance in world services trade FY’22. India’s services export stood at US$ 254.5 billion in FY’22 recording a growth of 23.5 % over FY’21 and registered a growth 32.7% in April-September 2022 over the same period of previous year. The combined value of goods and services export in April-December 2022 are estimated to be US$ 568.6 billion, showing a growth of 16% compared to April-December2021.

The Survey highlights that efforts are underway to promote international trade settlement in Indian Rupees. Oncetheseinitiativesgaintraction,dependenceonforeign currency would potentially reduce, making the economy less vulnerable to external shocks. In July 2022, the Reserve Bank of India (RBI) issued a circular permitting an additional arrangement for invoicing, payment, and settlement of exports/imports in Indian Rupees (INR) to promote the growth of global trade with emphasis on exports from India and to support the increasing interest in the global trading community in INR as an international currency.Theframeworkinvolvesinvoicingofexportsand imports in INR, market-determined exchange rates between the currencies of the trading partner countries, and settlement through special Rupee Vostro accounts opened with authorised dealer banks in India. The Survey states that the framework is significant as this could largely reduce the net demand for foreign exchange and couldassistIndianexportsingettingadvancepaymentsin Indian Rupees from overseas clients. It mentions that in the longer terms this could promote Indian rupees as an International currency once the rupee settlement mechanismgainstraction.

On the issue of Balance of Payments (BoP), the Economic Survey says that it encountered pressures during the year under review. While the impact of a sharp rise in oil prices was discernible in the widening of the Current Account Deficit (CAD), notwithstanding the cushion provided by the surplus on Invisibles (services, transfer, and income), policy tightening by the US Federal Reserve and the strengthening of the US dollar led to Foreign Portfolio Investment (FPI) outflows. As a result, the surplus of the capital account was lower than the CAD leadingtoadepletionofforexreservesonaBoPbasis.The Economic Survey expresses optimism that going forward, with the expected easing of crude oil prices, the resilience of net services exports and buoyant inward remittances would result in lower CAD during the remainder of FY23 andisexpectedtobewithinsustainablelimits.