Growth tonic

The government has claimed that “there was a detailed strategy in place, including specific targets set — country-wise, product-wise & EPC-wise (Export Promotion Council), monitoring and course correction behind the achievement of the export target”. While these efforts need to be commended, it is also important to recognise that India’s exports are also a function of several global factors. Two factors stand out in particular. One is the overall rate of economic growth in the world. This matters because a strong economic recovery implies there will be demand for Indian goods in other countries. Two, the amount of easy money available in the global economy. The ongoing financial year — 2021-22 — provided a conducive environment on both counts. Many western economies recovered from the Covid dip quite fast, thanks to massive government spending in those countries. Moreover, in response to the pandemic, most central banks in the developed world also expanded their balance sheets and provided cheap credit. Both factors had a salutary effect on India’s exports.

But close to the start of a new financial year, most central banks in the West are winding down their balance sheets and raising interest rates in a bid to contain inflation levels that are at multi-decade highs. Russia’s invasion of Ukraine has further exacerbated inflationary concerns. Overall, the outlook on economic growth, too, has taken a beating. Globalisation, which was under threat even before the pandemic, is likely to come under renewed pressure with more and more countries wanting to become self-sufficient or at least reduce dependence on foreign goods. The global policy landscape has become more challenging for India and will demand renewed efforts at the domestic level to raise the competitiveness of the exporters. Lastly, the government must not forget that higher prices had a huge role to play in India reaching the $400 billion target. As a percentage of the GDP, merchandise exports are far from where they were a decade ago.