India’s Commodity Trade and Strategic Choices – The New Indian Express

The 2021-2022 fiscal year ended with a somewhat mixed picture on the trade front. There was cause for celebration in merchandise exports, which hit a record high of $422 billion, crossing the $400 billion mark for the first time. But merchandise imports also saw a record increase, reaching $612 billion. The trade deficit reached $191 billion, increasing by more than $86 billion in one year. How do these figures behave in the current financial year?

Data for the first four months of 2022–23 allow us to make initial assessments about the structure of India’s merchandise trade. At first glance, the figures for April to July 2022 do not look promising as exports increased by 20%, but imports increased by more than 48%.

As a result, the trade deficit has already reached nearly $100 billion, up more than 135% from the previous fiscal year. Although exports clearly underperformed overall, technology-intensive electronics and labor-intensive ready-made garments saw substantial export growth, prompting some optimism.

However, gemstones and jewelry and pharmaceuticals, the other two product groups that have boosted Indian exports in recent decades, have lost their growth momentum.

Imports present the familiar picture of an import-dependent economy on the road to recovery. Imports of crude oil, petroleum products and coal have increased, and their import values ​​are also increasing due to firming international prices due to political uncertainties.

The past few weeks have seen a moderation in global energy prices due to weaknesses in major economies, primarily the United States. This trend should help limit the surge in import bills.

But what is more alarming for the Indian economy is the increase in imports of electronic, electrical and non-electrical products and machinery, since India’s northern neighbor is the largest supplier important in both product groups. The sharp increase in imports of textile yarns and raw cotton is equally worrying, as it could have serious consequences for domestic producers.

In recent months, the Indian government has taken two sets of decisions that have brought about significant changes in export destinations and import sources. First, the government reversed its 2019 decision to disengage from global integration processes and began negotiations to conclude a Comprehensive Economic Partnership Agreement (CEPA) with eight partners. While CEPA with the United Arab Emirates (UAE) is being implemented and an early harvest agreement with Australia awaits signing, agreements with several others, including the European Union ( EU) and the United Kingdom (UK), are being negotiated.

Data on export destinations are available for the first quarter (April-June), and they provide clues as to what these actual and potential agreements could offer in terms of additional market access. This is an important issue because India’s main shortcoming in existing agreements with ASEAN, Korea and Japan has been its inability to utilize market access opportunities offered by partner countries.

The first quarter figures show that India’s exports to the UAE increased by more than 26% compared to the corresponding period in 2021-22. This is a positive development given that exports to the former main export destination had been steadily declining over the previous decade.

Although the increase in exports between April and June 2022-23 is not widespread, with petroleum products accounting for most of the incremental gains, the rise in exports of vehicles and electronic goods is showing encouraging signs. Imports from the United Arab Emirates increased by almost 58%, 87% of which was due to the increase in the oil import bill.

While not surprising given the increased demand for energy resources in India, the government will do well to closely monitor imports from this CEPA partner to ensure that third parties cannot take advantage of the preferential access granted to the United Arab Emirates.

Exports to the EU and UK, CEPA’s two potential partners, have increased this fiscal year, with the latter registering a 46% increase. However, the challenge for India would be to maintain its current level of market access in the face of the headwinds these countries are facing.

The most notable development in the first quarter is India’s substantially increased dependence on Russia. Compared to the previous year, imports from Russia have increased by almost 370%, making it India’s sixth largest source of imports from 19th in April-June 2021-2022. More importantly, Russia is now India’s third largest source of crude oil, with a 13% share, just behind Saudi Arabia, which has 17%. Russia is also the largest source of fertilizer, with a 19% share.

These trends in merchandise trade have sent a clear message: more than ever, India’s trade commitments depend on the strategic choices the government makes in these difficult times.

Biswajit Dhar
Professor, Center for Economic Studies and Planning, School of Social Sciences, JNU
([email protected])

The 2021-2022 fiscal year ended with a somewhat mixed picture on the trade front. There was cause for celebration in merchandise exports, which hit a record high of $422 billion, crossing the $400 billion mark for the first time. But merchandise imports also saw a record increase, reaching $612 billion. The trade deficit reached $191 billion, increasing by more than $86 billion in one year. How do these figures behave in the current financial year? Data for the first four months of 2022–23 allow us to make initial assessments about the structure of India’s merchandise trade. At first glance, the figures for April to July 2022 do not look promising as exports increased by 20%, but imports increased by more than 48%. As a result, the trade deficit has already reached nearly $100 billion, up more than 135% from the previous fiscal year. Although exports clearly underperformed overall, technology-intensive electronics and labor-intensive ready-made garments saw substantial export growth, prompting some optimism. However, gemstones and jewelry and pharmaceuticals, the other two product groups that have boosted Indian exports in recent decades, have lost their growth momentum. Imports present the familiar picture of an import-dependent economy on the road to recovery. Imports of crude oil, petroleum products and coal have increased, and their import values ​​are also increasing due to firming international prices due to political uncertainties. The past few weeks have seen a moderation in global energy prices due to weaknesses in major economies, primarily the United States. This trend should help limit the surge in import bills. But what is more alarming for the Indian economy is the increase in imports of electronic, electrical and non-electrical products and machinery, since India’s northern neighbor is the largest supplier important in both product groups. The sharp increase in imports of textile yarns and raw cotton is equally worrying, as it could have serious consequences for domestic producers. In recent months, the Indian government has taken two sets of decisions that have led to significant changes in export destinations and import sources. First, the government reversed its 2019 decision to disengage from global integration processes and began negotiations to conclude a Comprehensive Economic Partnership Agreement (CEPA) with eight partners. While CEPA with the United Arab Emirates (UAE) is being implemented and an early harvest agreement with Australia awaits signing, agreements with several others, including the European Union ( EU) and the United Kingdom (UK), are being negotiated. Data on export destinations are available for the first quarter (April-June), and they provide clues as to what these actual and potential agreements could offer in terms of additional market access. This is an important issue because India’s main shortcoming in existing agreements with ASEAN, Korea and Japan has been its inability to utilize market access opportunities offered by partner countries. The first quarter figures show that India’s exports to the UAE increased by more than 26% compared to the corresponding period in 2021-22. This is a positive development given that exports to the former main export destination had been steadily declining over the previous decade. Although the increase in exports between April and June 2022-23 is not widespread, with petroleum products accounting for most of the incremental gains, the rise in exports of vehicles and electronic goods is showing encouraging signs. Imports from the United Arab Emirates increased by almost 58%, 87% of which was due to the increase in the oil import bill. While not surprising given the increased demand for energy resources in India, the government will do well to closely monitor imports from this CEPA partner to ensure that third parties cannot take advantage of the preferential access granted to the United Arab Emirates. Exports to the EU and UK, CEPA’s two potential partners, have increased this fiscal year, with the latter registering a 46% increase. However, the challenge for India would be to maintain its current level of market access in the face of the headwinds these countries are facing. The most notable development in the first quarter is India’s substantially increased dependence on Russia. Compared to the previous year, imports from Russia have increased by almost 370%, making it India’s sixth largest source of imports from 19th in April-June 2021-2022. More importantly, Russia is now India’s third largest source of crude oil, with a 13% share, just behind Saudi Arabia, which has 17%. Russia is also the largest source of fertilizer, with a 19% share. These trends in merchandise trade have sent a clear message: more than ever, India’s trade commitments depend on the strategic choices the government makes in these difficult times. Biswajit Dhar Professor, Center for Economic Studies and Planning, School of Social Sciences, JNU ([email protected])