The Economy of India is recovering from the deadly second wave of Covid-19 in the first half of 2021. One of the most important aspects of this is record-high exports of merchandise.
What are Exports?
Numerous economists highlight that record-high exports have a vital role in revenue generation and economic growth. In simple words, exports are goods that are produced in one country and sold to buyers in another. Exports are the reason for countries to maintain diplomatic relations with other nations.
Record-High exports in India:-
India made record exports worth $35.43 billion in July. This is the highest figure, first recorded in July 2021. As per data by the commerce and industry ministry, the reason for this is a high recovery in key global markets and robust demand.
In July 2020, outbound ships grew by nearly 50%. This can be partially associated with a favourable base. This growth is led by high demands for gems and jewellery, engineering goods, textiles and apparel, chemicals and electronic goods, etc.
What are the reasons for India’s record-High exports and its current status?
From the past few months, the Exports in India have been rising gradually. This is a sign of a sharp rise in demand for goods and services as the global markets are recovering from Covid-19.
The exports of India are further expected to rise as the global markets are getting back on pace. Exports can also increase if the export sector gets more incentives from the government.
It is important to note that the export figures of India have remained above $30 billion for the 5th consecutive time in July. In the first quarter, the shipments for FY22 were recorded at $95 billion. The export growth was a result of heightened demands for particular goods.
The maximum exports went to:-
- United States ($6.7 billion)
- United Arab Emirates ($2.4 billion)
- Belgium ($826 million)
But, there has been a decline in exports to Malaysia, Iran, and Tanzania.
The five commodities that reported the highest exports in July 2021 were:
- Petroleum products (215 per cent)
- Gems and jewellery (130 per cent)
- Cereals (70.25 per cent)
- Man-made yarn and fabrics (58 per cent)
- Cotton yarn and fabrics (48.02 per cent)
ICRA chief economist Aditi Nayar shared that non-oil exports were strong in July. Still, they were below the March level. “A spike in oil exports boosted the overall merchandise exports to a record high level in July. Sustenance of oil exports at this level would significantly boost the expansion in merchandise exports in FY22,” Nayar said.
The other two biggest driving forces behind record high exports in 2021 are:-
Low-baseline effect:
One reason behind the record high exports is the low baseline effect. The shrinkage in exports of 2020 led to a low baseline effect. So, the exports from March 2021 will recover. Like, the merchandise export in India was similar to that in March 2019. It also reflects the global recovery. India has a 30% export share with the US, UAE, and China. So, the economic recovery in the US and China reflects India’s exports.
Impact of increased commodity price:
Some analysts believe that the increased exports are due to increased commodity prices of petroleum products, refined crude oil, gems, and jewellery. The loose monetary policies have led to high prices of commodities as an asset. Engineering goods like metal products, industrial machinery, equipment and auto components, etc have increased rates due to economic recovery in big economies like the US and China.
Exporters witness demand for exports, but logistics is a challenge:
The export and supplies of goods in the global market have seen a 60-70% rise. There is a surge in demand for buyers, especially after the re-shifting of business between India and China. But, the exports are facing logistic problems. As a result of global issues, there are container shortages. There are fewer shipping vessels operated due to Covid-19. Some of them have been stuck on ports for a long time now.
India sights to diversify exports in electronics and pharma:
The main commodities exported by India are petroleum products, gems, and jewellery, cereals, cotton, and textiles. But, the recent surge has given rise to other sectors like electronics and pharma. According to Ajay Sahai, Director General, and CEO of Federation of Indian Export Organizations (FIEO), a trade promotion body under the Ministry of Commerce: “We have fairly diversified our exports and even electronics are doing very well. From the way the PLI [Production Linked Incentive] scheme has been rolled out, we are seeing success in mobile exports and other segments of electronics.”
They are also known as sunrise sectors, which include the developing sectors that are expected to witness a good rise in the future.
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