Exports seen to have declined 5% in 2023
NEW DELHI : India’s merchandise exports in 2023 would not buck the larger global trends and are set to contract 5.3%, according to an analysis by trade policy think tank. But the performance of electronics segment stands out, giving indications that support measures might work for other priority sectors too.
According to the United Nations Conference on Trade and Development, global exports would see a contraction of 5% as China has reported a 5.2% drop in merchandise exports in January-November.
In 2023, India’s merchandise exports decreased to $429 billion from $453 billion in 2022, a fall of 5.3%, while the decline in imports was deeper at 7% to $669.6 billion, according to the projections by Global Trade Research Initiative (GTRI).
Services exports increased 10.5% on year to $333.6 billion, while services imports were stable at $176.4 billion. The services sector helped India record an overall exports growth of 1% at $763 billion.
As fall in imports is more than exports, the overall trade deficit (merchandise and services) will decline to $82.8 billion from $141.3 billion.
Within India’s export basket, 78% of the products by value are expected to decline 11.6% on year in 2023 to $320 billion.
“The decline can be attributed to weak global demand and India gradually losing competitiveness in labour intensive sectors,” the GTRI analysis said.
The high priority items that have seen a decline in 2023 are engineering and petroleum products that account for almost 50% of total exports by value. Following closely behind are chemicals, gems and jewellery, textile and garments, leather, handicrafts, carpets and some agriculture products.
During the year, smartphones emerged as a major success story for India, with its exports projected to surge to $13.9 billion in 2023 from $7.2 billion in 2022. This significant increase contributed to the overall rise in electronics exports, which reached $26.8 billion, marking a growth of 26.2%. There has been a noticeable increase of 25% in import of electronic components to $30 billion in 2023. This has impacted imports of finished electronic products like computers, laptops, and other hardware as they dropped from $13.8 billion in 2023 from $15.4 billion last year.
“These trends indicate early success of the production-linked incentive scheme and suggest strengthening of India’s electronics manufacturing capabilities,” author of the analysis and Co-Founder of GTRI Ajay Srivastava said.
Success in electronics underscores the necessity for India to adopt a similarly focussed strategy to rejuvenate exports in labour-intensive sectors.
Small firms active in these sectors face 10-15% cost disadvantages vis-a-vis the competition due to high cost of capital, low quality grid power, delays at the ports and higher compliance cost.
However, PLI is not an answer to product categories like textiles. leather and handicrafts where thousands of firms make the same products as it will put non-recipients to disadvantage.
“A horizontal scheme extending 2-3% incentive to every firm in the sector will help in meeting some of the cost disability,” Srivastava added.