Govt studying trends; to set export target for FY23 in July
Premium- A realistic target is expected to be given to the embassies and export promotion councils
In a year marred by multiple uncertainties, the Union government is studying the initial trade trends of the first quarter and plans to set a “realistic" export target for FY23 in the first week of July, a commerce and industry ministry official said.
Exports estimates assume significance as the World Bank expects a sharp decline in global growth from 5.7% in 2021 to 2.9% this year due to the supply and trade disruptions triggered by the Russia-Ukraine war.
“Global macroeconomic fundamentals have not been upbeat lately, especially due to the Russia-Ukraine war. Ever since the Fed began raising interest rates, there is a growing chance global growth could get impacted. So, the ministry is looking at the trend in the first few months. A realistic target will be given to the embassies and export promotion councils, and it will be announced next month," the official said on the condition of anonymity.
Another official said many exporters have not been able to provide a clear picture with regards to what they can achieve. However, he added that the initial disruption in the Russian route has eased and the majority of stuck payments have been unblocked.
“Expecting the same export growth rate on a high base would not be realistic. The global disruption will impact trade in Asia. Besides, a prolonged lockdown in China is worrying not only for India but for the entire global supply chain," the second official added.
Commerce secretary B.V.R. Subrahmanyam during a panel discussion at CNBC-TV18 said that exports during the first quarter could come in at $116 bn and that the first quarter has been encouraging.
“First quarter is usually 22% of the total exports. Going by the current projection the total exports of FY23 could cross half a trillion dollars," Subrahmanyam said.
Notably, in FY22, India exceeded its export target to clock record merchandise shipments of $420 billion. The growth was led by a surge in engineering and electronic goods shipments. However, imports surged at a record pace as well, pushing the trade deficit to a record high.
India’s merchandise trade deficit ballooned to a record $24.29 billion in May, driven by a surge in gold imports, exerting more pressure on the domestic currency. Elevated commodity prices in the wake of the war in Ukraine have kept merchandise imp-orts above $60 billion for the third month in a row.
Economists said that rising uncertainty due to the Russian invasion of Ukraine could worsen the trade deficit and widen the current account deficit, as global oil prices are likely to remain elevated, while supply-side bottlenecks and rising freight costs may hurt exports.
Meanwhile, Prime Minister Narendra Modi has emphasized the need to set long-term export targets. He added that the government has raised export targets and has doubled its efforts to achieve them.
“Global trade growth is anticipated to slow to 4% in 2022 as the war in Ukraine further disrupts global value chains, global activity gradually shifts back toward the less trade intensive services sector, and international mobility moves toward pre-pandemic levels only gradually," the World Bank said in a report.
However, global trade growth is expected to moderate to an average of 4.1% in 2023-24 as global demand for tradable goods continues to decelerate, the report further added.
Rising food prices have already forced India to announce export curbs on commodities such as wheat and sugar. As per World Bank forecasts, agricultural prices could rise 18% this year, above previous projections.