Why India’s export targets have gone for a toss

By: Sutanu Guru

With exports data for October 2022 being released, it is now crystal clear that the ambitious exports target of $ 820 billion for 2022-23 will remain a pipe dream. The primary culprit is global economic slowdown

Just a few days ago, the Ministry of Commerce released trade data for the month of October, 2022. Merchandise exports have crashed to $ 29.78 billion; a decline of 16.7% compared to October 2021. This is the first time that merchandise exports have fallen in 19 months. There is barely any category in which exports have not slumped; with textiles and readymade garments taking a big hit. Textile exports crashed by more than 41% while apparel exports too fell by close to 30%. These numbers make it very clear that the ambitious targets set by Union Minister Piyush Goyal for Indian exports will not materialise in the current financial year.

The chart is self explanatory. The fiscal year started very well with merchandise exports being estimated at $ 38.19 billion in April 2022. By October, the tables had turned and merchandise exports were estimated at $ 29.78 billion. Barring West Asia, all major export destinations for India including Europe and North America are either staring at a recession or seeing a major slowdown in economic growth. Persistent inflation in these countries has also prompted consumers to become tight-fisted. With no signs whatsoever of any economic recovery in the near future, Indian exports will struggle to grow; if not actually decline as they have since June.

Before the Russian invasion of Ukraine, Piyush Goyal was confident of India clocking merchandise exports of about $ 470 billion in 2022-23. The first seven months have seen total exports worth $ 259 billion. If the export target is to be met, merchandise exports will need to clock more than $ 42 billion a month for the next five months. Even the optimistic minister will admit that it is not possible. In any case, the World Trade Organisation now estimates that growth in global trade will fall to just 1% in 2023.

As the second chart shows, the situation is not as grim when it comes to services sector exports that are dominated by IT and ITES. From $ 22.59 billion in April 2022, services sector exports have grown steadily to clock $ 28.58 billion in October 2022. But even here, the massive condominium slowdown in enveloped economies in Europe and North America are beginning to cast a shadow on services sector exports. Everyday, there comes news of giant IT and technology companies laying off tens of thousands of employees. These companies constitute bread and butter opportunities for IT and ITES companies in India. It would be naïve to expect them to remain immune to those headwinds. In any case, total services sector exports during April-October 2022 are estimated to be $ 172 billion. The target for 2022-23 is $ 350 billion. Services sector exports have to clock an average of $ 35.6 billion a month from now till March 2023 if the target is to be met. That doesn’t look possible anymore, barring some miracle or divine intervention.

If you are an optimist, it looks like India is set to miss its $ 820 billion combined exports target by about $ 100 billion. If you are a pessimist, that number could be as high as $ 200 billion. As a later piece in IndiaTracker will explain, this also means that a 7% GDP growth for the Indian economy now looks impossible.