India’s merchandise exports have witnessed a linear increase in the last few years, apart from the pandemic year. Amidst this, the government has announced an export target of $1 trillion by 2030, which effectively would mean growing at 10.5 per cent beginning FY23. With exports touching their highest level of $451 billion in FY23, India will be looking at maintaining this growth streak in FY24 as well.

However, the latest exports data raises some concerns. Currently, there is a shortfall of $134 billionvis-a-vis the target of $451 billion. India’s exports in April-December 2023 stood at $317.1 billion, which was 5.7 per cent less than the $336.3 billion logged in April-December 2022.

For exports this fiscal to touch the FY23 level, exports must grow at a monthly average of $44.6 billion during the last quarter of FY24.

One of the key reasons for the fall in overall exports during the 9-month period has been petroleum products, which have over the years been a flag-bearer of India’s exports. Exports of petro products showed a negative growth rate of -15.6 per cent during April-December 2023 compared to the corresponding year-ago period, largely due to a fall in exports in value terms to regions across the globe.

Further, the International Energy Agency (IEA) recently said that India’s growth in oil product consumption may see some downturn going forward as the demand growth would slowdown.

Gems and jewellery, too, have been reeling under pressure as cut and polished diamonds and lab grown diamonds are witnessing sluggish exports, more so from the US which is the main market for India.

It is observed that seven out of the top 10 items of export exhibited a negative growth rate during April-December 2023. Positive signs were seen from electronic goods, drugs and pharma, cotton yarn, fabrics, etc.

In fact, electronic goods have been exhibiting double-digit growth on a monthly basis as well as year-on-year, and this could continue till the end of this financial year. Drugs and pharma, which have been doing well, can up the ante to help India reach last year’s export number.

Interestingly, engineering goods have been trying to hold on, and hence have the capacity to increase their share in the last three months of the current financial year.

Going ahead, with the Red Sea crisis impacting India’s exports to Europe, which constitute around 15 per cent of total exports from the country, is also poised to impact the overall merchandise exports. While India does face some headwinds this fiscal to match last year’s merchandise export numbers, it is important to have a balanced portfolio of commodity and non-commodity-based export items in its priority list.

The writer is an economist with Exim Bank. Views are personal