Why India’s exports are declining? — Indian Economy (2024)

FAQs

Why India’s exports are declining? — Indian Economy? ›

While geopolitical tensions have led to higher energy prices and transportation costs, resulting in cost pressures for exporters, tighter monetary conditions in advanced economies have led to a decline in demand, further hurting exports.

A surge in gold and oil imports led to the rise in trade deficit. Moreover, Indian exports have been impacted by a slowdown in global growth.

The reason is simple. To become an export-oriented country, the country's production(i.e. ability to produce goods or services) should be cost-effective maintaining high-quality standards. For this to happen, we need to control the four factors of production namely Land, Labour, Capital and Entrepreneurship.

India's trade deficit with China, Russia, South Korea, and Hong Kong increased as compared to 2022-23, while it narrowed with UAE, Saudi Arabia, Indonesia, and Iraq. USA, Netherlands, UK, Belgium, and Italy are the top 5 trading partners with which India has trade surplus.

According to figures from the Centre for Monitoring Indian Economy, spending on the rail and road transport network has increased from less than 0.5% of GDP in 2015 to 1.6% recently. The trade deficit in goods also reflects the fact that India hardly participates in Global Value Chains (GVC).

While geopolitical tensions have led to higher energy prices and transportation costs, resulting in cost pressures for exporters, tighter monetary conditions in advanced economies have led to a decline in demand, further hurting exports.

India's reasons were domestic — rising food prices, high inflation and fear of rice shortage due to El Nino disruptions as the country heads into a festive season and elections — but the bans' impact is now being felt globally, with prices shooting up.

Additionally, India has been proactive in signing Free Trade Agreements (FTAs) with strategically significant countries to boost economic activities. Recently, India concluded FTA deals with Mauritius, Australia, and the UAE, which are expected to further provide impetus to Indian exporters.

Structural factors: Some structural (read long term) like low technological adaptability and absence of technology intensive foreign investment are curtailing India's exports. The slowdown of engineering goods, poor progress in electronics are the result of such structural factors.

What is the top import export of India? ›

India top imports include crude oil, coal, diamonds, chemicals, pharmaceuticals, rubber, plastics, electronics, and machinery, which account for 82% of all goods imports. China is still India's major import partner, followed by the US, UAE, Saudi Arabia, Iraq, and others.

India's top export includes Petroleum Products, Gems & Jewellery and Textiles and Garments etc. Non-traditional markets such as Africa, Latin America, and Oceania are likely to expand, giving India possibilities to diversify its export portfolio.

Share of Indian exports FY 2022, by leading destination country. The United States was the largest export destination for Indian exports in fiscal year 2022, accounting for nearly 18 percent. United Arab Emirates followed at over six percent of India's exports that same year.

In summary, despite the geopolitical complexities and tensions, the importance of trade cannot be overstated and completely banning Chinese imports is not possible nor desirable. Trade forms the bedrock of economic growth, technological advancement, and peaceful coexistence among nations.

The numbers: The trade deficit surged by almost 9% in April to a one-and-a-half-year high because of an increase in imports, a sign that a steadily growing U.S. economy still has plenty of demand. The deficit climbed to $74.6 billion in April from $68.6 billion in the prior month, government data showed.

Frequent changes in government, unstable tax structure, etc. result in loss of trust of foreign investors and discourage inflows of capital. Domestic investors also prefer to invest outside the economy. As a result, an adverse position created in the balance of Payment.

The trade deficit with China has been a concern, with imports far exceeding exports, contributing to India's overall trade deficit. Currency Fluctuations: Currency fluctuations can impact the balance of trade by affecting the competitiveness of exports and the cost of imports.

Trade deficits occur when a country imports more goods and services than it exports, resulting in a negative balance of trade. They can affect domestic industries, employment, and economic growth, and are influenced by factors such as exchange rates, trade policies, and global economic conditions.