The Hindu Editorial Analysis- 17th May 2024 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Trade imbalance 

Why in News?

India's merchandise exports reached a peak of USD 41.68 billion in March 2024 compared to the FY 2022-23.

What does the Current Export Data Reveal?

Exports and Imports in March 2024:

• Exports: India’s goods exports reached USD 41.68 billion in March 2024. This is a slight decrease of 0.67% compared to the same month last year.
• Imports: Goods imports declined by 6% to USD 57.3 billion in March 2024.
• Trade Deficit: The goods trade deficit reduced to USD 15.6 billion, marking the lowest level in 11 months.

Key Factors Influencing Trade Figures:

• Gold Imports: Gold imports significantly decreased by 53.6%, falling to USD 1.53 billion in March.
• Non-Oil, Non-Gold Imports: The reduction in imports excluding petroleum and gold played a role in the overall decline in import figures.
• Silver Imports: In contrast, silver imports surged, reaching USD 816.6 million.

Impact on Full-Year Figures (FY 2023-24):

• Export Performance: The average monthly goods exports were USD 35.4 billion in the first ten months of the fiscal year. The increased figures in the last two months boosted the total annual exports to USD 437.1 billion. However, this is still 3.1% lower than the record USD 451.1 billion achieved in the previous year.

FY 2023-24 Projections and Achievements:

• Overall Exports: Despite ongoing global issues such as the Ukraine war and the West Asian crisis, overall exports (merchandise and services) are projected to exceed last year's record. The estimated total for FY 2023-24 is USD 776.68 billion, showing a slight growth of 0.04% from USD 776.40 billion in FY 2022-23.

Merchandise Export Drivers:

• Electronic Goods: Exports increased by 23.64%, reaching USD 29.12 billion.
• Drugs and Pharmaceuticals: Exports grew by 9.67%, amounting to USD 27.85 billion.
• Engineering Goods: Exports rose by 2.13%, totaling USD 109.32 billion.

Agricultural Commodities Growth:

• Positive growth was observed in the exports of agricultural products, including tobacco, fruits, vegetables, meat, dairy products, spices, and oil seeds in FY 2023-24.

Trade Deficit Improvement:

• Overall Trade Deficit: The overall trade deficit is estimated to improve significantly by 35.77%, reaching USD 78.12 billion in FY 2023-24.
• Merchandise Trade Deficit: The merchandise trade deficit improved by 9.33%, down to USD 240.17 billion compared to the previous fiscal year.

• Current Account Balance Outlook: The reduction in the goods trade deficit in March is expected to positively impact the current account balance for the final quarter of FY 2023-24.

What Should be the Strategy to Further Enhance India’s Exports?

1. Land, Power, and Capital Costs: The government needs to urgently address challenges related to the costs of land acquisition, power tariffs, and availability of capital to reduce financial burdens on businesses
2. Scale and Efficiency: Promoting economies of scale can help businesses reduce their operational costs significantly, enhancing overall efficiency.
3. Infrastructure and Logistics: Improving transportation networks, ports, and warehousing facilities is crucial to boost supply chain efficiency and reduce logistical costs.
4. Labour Flexibility: Streamlining labour laws and ensuring flexibility in the workforce can make Indian companies more competitive by reducing regulatory burdens.
5. MSME Support: Strengthening support for Micro, Small, and Medium Enterprises (MSMEs) will enhance their competitiveness and contribute to the broader economic landscape.
6. Trade Agreements:
   • India should actively engage in negotiating and signing trade agreements with key trading partners to improve market access for its exports.
   • Both bilateral and multilateral treaties can create new opportunities for Indian products in global markets.
7. Technology and Quality Focus: 7. R&D and Advanced Technologies:
   • Investing in research and development and adopting advanced technologies will help improve product quality.
   • Securing quality certifications and adhering to international standards are essential for building consumer trust and expanding market reach.
8. Global Promotion:
   • The government and industry bodies should work together to promote “Brand India” globally.
   • Emphasizing India’s rich cultural heritage, skilled workforce, and innovative capabilities will attract international buyers and investors.
9. Manufacturing Diversification: Encouraging multinational companies to diversify their manufacturing bases away from China, positioning India as a favorable alternative for investment and production.

Conclusion: By implementing these strategies, India can sustain and enhance its export growth, surpass previous records, and contribute significantly to economic prosperity and global trade dynamics.

UPSC Civil Services Examination, Previous Year Question (PYQ)

Prelims:

Q1. The SEZ Act, 2005 which came into effect in February 2006 has certain objectives. In this context, consider the following: (2010)

1. Development of infrastructure facilities.
2. Promotion of investment from foreign sources.
3. Promotion of exports of services only.

Which of the above are the objectives of this Act?

(a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2 and 3

Ans: (a)

Q2. Consider the following statements: (2021)

The effect of devaluation of a currency is that it necessarily

1. improves the competitiveness of the domestic exports in the foreign markets
2. increases the foreign value of domestic currency
3. improves the trade balance

Which of the above statements is/are correct?

(a) 1 only
(b) 1 and 2
(c) 3 only
(d) 2 and 3

Ans: (a)