Fragmentation, protectionism may hurt export growth: Economic Survey

Export of goods and services from India is likely to increase this fiscal with advanced economies looking up, but fragmentation along geopolitical lines and protectionism may distort goods trade growth, impacting India’s external sector, the Economic Survey for 2023-24 has said.

“The global trade outlook for 2024 remains positive, with merchandise trade expected to pick up after registering a contraction in volumes in 2023,” the survey noted. With improving growth prospects in advanced economies, goods exports will rise and services exports are also likely to witness a further uptick, it added.

Also read

ONDC clocks 68 m transactions; e-commerce must innovate to widen reach: Economic Survey

Economic Survey says schemes like PLI, FAME-II and ACC battery storage helped auto industry grow

Demand under MGNREGS is not a true indicator of rural distress: Economic Survey

“Conversely, increased fragmentation along geopolitical lines and renewed thrust on protectionism may distort merchandise trade growth, impacting India’s external sector,” it said. 

On the positive side, despite the ongoing geopolitical headwinds, including the Red Sea crisis, which impacted India’s merchandise exports, the fall in international commodity prices ensured a lower trade deficit in FY24 than in FY23.

A narrowing merchandise trade deficit and rising service exports have improved the current account deficit (CAD), ending with a surplus of 0.6 per cent of GDP in Q4 of FY24, it observed. “In the coming years, India’s trade deficit is expected to decline further as the PLI [production-linked incentive] scheme is expanded and India creates a globally competitive manufacturing base in several product categories. Further, the recently signed FTAs [foreign trade agreements] are expected to increase the global market share of the country’s exports,” it said.

Various international agencies and the RBI expect the current account deficit (CAD) to gross domestic product (GDP) to moderate below one per cent for FY24, driven by growing merchandise and services exports and resilient remittances.

“Affected by ongoing geopolitical tensions, India’s merchandise exports witnessed contraction in H2 of FY23 and H1 of FY24. However, there is evidence of a trend reversal in H2 of FY24, with merchandise exports registering positive growth,” the survey noted.

In 2023-24, goods exports declined 3 per cent to $437 billion; but in the first quarter of 2023-24, exports are back on the growth track, it said.