There is a crucial need to make India’s exports more attractive amid continued uncertainty in global growth and trade conditions, with headwinds from geopolitical tensions and supply-chain disruptions and higher logistics costs posing downside risks to growth, the country’s finance ministry said in a recent report.
Highlighting the need to work on an export strategy, the ministry said the broader economic outlook, however, ‘appears bright’.
The manufacturing purchasing managers’ index’s employment sub-index suggests the generation of more employment opportunities in the manufacturing sector supported by an increase in export orders, rising domestic production and expansion in international sales, the report said.
“Given persisting uncertainties for global output and trade growth, finding ways to enhance the competitiveness and attractiveness of India’s exports is both urgent and important,” the ministry’s Monthly Economic Review for January said.
The country’s merchandise exports in January increased by a mere 3.1 per cent year on year (YoY) to $36.92 billion, latest trade statistics show. These were down by 4.9 per cent YoY at $353.92 billion between April 2023 and January 2024, while imports during the period were lower by 6.7 per cent at $561.12 billion.
“Downside risks to trade include a spike in new commodity prices from geopolitical shocks, including continued attacks in the Red Sea and supply disruptions or more persistent underlying inflation in the developed world, which could extend tight monetary conditions. This could impact the expected recovery in global demand, thereby affecting the prospects for India’s exports,” the ministry said.
“Prospects of healthy Rabi harvesting, sustained manufacturing profitability, and underlying service resilience are expected to support economic activity in FY25,” it said.
The ministry is hopeful of household consumption rising, business sentiment improving, the government continuing to focus on capex, and banks and firms witnessing healthy balance sheets. The response from the supply side has been broad-based, it noted.
Retail inflation declined to a three-month low of 5.1 per cent in January due to both food and core components. Core inflation continued to decline for the eighth consecutive month, from 5.2 per cent in May last year to 3.5 per cent in January. The outlook for a reasonably low headline inflation rate is good, it added.