Despite global trade uncertainties, India’s exports are charting a new course, bilateral agreements, free trade agreement (FTA) and venturing into uncharted territories like Africa, Latin America, and Central Asia have led to all time high export of USD.
With these new initiatives, India has seen a surprising surge in exports of precious metals, minerals, automobiles, electronics, pharmaceuticals, organic chemicals, textiles, spices and defence equipment.
Exports from India soared 11.9 per cent year-on-year to USD 41.4 billion in February 2024, the highest level since March 2023, boosted by sales of drugs and pharmaceuticals, engineering and electrical goods.
Exports to new markets like Africa, Latin America and Central Asia, have witnessed a significant influx of USD 234 million worth of goods, including cars, two- and three-wheelers, and precious metals, during the April-December 2023 period.
This translates to a 5 per cent growth in exports for key sectors.
FIEO DG Ajay Sahai said, “The medium- to long-term prospects of Indian exports are very encouraging. We are on course to reach the target of USD 1 trillion each in goods and services exports by 2030. However, in the first quarter of the next financial year, some challenges may be faced due to high inflation and geopolitical uncertainties. We expect the US Fed to start reducing the key rates in its next review, which will signal other countries central banks, thus pushing demands.”
The focus on new markets, bilateral trade pacts, and FTA’s extends beyond value, it will reduce dependence on the traditional export items and foster stronger trade partnerships and economic cooperation across continents.
Sahai said, “The strategy to push FTAs with complimentary economies is showing good results. It is win-win situation as while domestic manufacturing gets a boost with duty free imports of raw materials and intermediates while our exports get better market access.”
He added, “While we require a minimum 3-5year time frame to assess any FTA, in a very short period we are seeing growth in the bilateral trade with partner countries of UAE and Australia and exports growth to such countries growing much faster than overall exports. We expect to sign FTA with UK, Oman and Eurasian countries by the next financial year.”
India’s main export partners are: United States with 15 percent of the total exports, United Arab Emirates, 11 percent, Hong Kong 5 percent, China and Singapore 4 percent each and United Kingdom 3 percent.
Trade with UAE has surged post free trade agreement between the two countries.
FTA talks with the UK are at an advanced stage and a trade pact is likely to be signed after the formation of the new government. India has signed 14 FTA’s in 2024, including a Trade and Economic Partnership Agreement (TEPA) with the European Free Trade Association (EFTA) on March 10, 2024. The EFTA consists of Iceland, Liechtenstein, Norway, and Switzerland
The ongoing Red Sea crisis, which has disrupted traditional shipping routes, is a new challenge to trade. But, India has cleverly turned this adversity into an opportunity. By embracing longer routes via the Cape of Good Hope, new markets in Africa and the Americas are being unlocked.
Sahai said, “While the Red Sea crisis has affected the bottom line of exporters, our top line has not been affected much. However, some commodities and low-value, high-volume products have taken a hit. Most contracts are not coming for renewal and we have to see if existing buyers are willing to factor in high freight prices. The trend so far suggests that in most of the cases, both sides are mutually settling and agreeing to absorb a part of the high freight.”
India’s export trajectory is in a positive zone. The proactive market diversification strategy, coupled with a focus on innovation and adaptability, positions India as a strong contender in the global trade arena.
With a shrinking trade gap, rising exports, and a growing global presence, India’s export story transcends mere economic figures. It embodies resilience, strategic foresight, and the potential to reshape the global trade landscape in the years to come.
