Tariff uncertainties, decline in commodity & metal prices, and volatility in currencies dragged down merchandise exports in the last few months, explains Ajay Sahai. A turnaround in the exports trajectory would require more supportive policies and efforts to boost global competitiveness of assorted sectors
Why are exports declining?
Uncertainties due to tariff wars, the decline in commodity and metal prices, and volatility in currencies largely contributed to the decline in recent months. Two key sectors — petroleum and gems & jewellery —contributing to about a quarter of India’s exports, along with iron & steel, copper and zinc exhibited double-digit decline in the last few months.
Performance in 2024
Merchandise exports grew by a modest 2.6 % in the calendar year 2024. However, considering the global headwinds including geo-political uncertainties, elevated inflation levels across economies impacting demand and rising protectionism across nations, this was a good performance, especially as very few countries recorded positive growth.
Sectors which are doing well
Electronics, auto-components, machinery, medical devices, plastics, inorganic chemicals, pharma, apparel, meat products, tea, coffee, spices and certain agricultural products have been witnessing good growth. Exports to the US, the UK, the UAE, Japan, Netherland, Singapore, Malaysia, the Philippines, Saudi Arabia, Kuwait, Russia and Mexico have shown promising growth in 2024.
Can exports touch $2 trillion by 2030?
Goods and services exports are likely to cross $800 billion in 24-25. Reaching $2 trillion from here would require a 16%-plus compound annual growth rate, which is challenging but within reach with an enabling and supportive ecosystem for exports. Exports are now seen as the fourth engine of growth. With more production flowing from the 14 PLI-assisted sectors, an aggressive Free Trade Agreement strategy, and encashing on opportunities offered by the tariff wars and more internationalisation of MSMEs, we can reach the target.
Impact of reciprocal tariffs
Reciprocal tariffs refer to a trade policy where a country imposes tariffs on imports from another country that are equivalent to the tariffs that the latter places on its exports. It is difficult to assess its impact as it’s not clear how the tariffs will be applied—whether at the product level, the sector level, or the country level. We are already engaged with the US on a Bilateral Trade Agreement (BTA) which is to be finalised by September-October of 2025. We are hopeful that the April 2, 2025 deadline for imposing reciprocal tariffs will be deferred for India.
How will the tariff war impact exports?
The additional tariffs imposed by the US and the retaliatory tariffs imposed by some of the partner countries will adversely impact global trade. The World Trade Organisation (WTO) has already revised its growth forecast downward for 2025. However, this may provide India much more export opportunity looking at the orders placed, increasing number of enquiries and proposals for joint ventures and equity infusion in many Indian companies from the US. If we successfully conclude the BTA with the US,we will see exponential growth in our exports to the US as we are complementary economies. We are also competing in the US with some of the other exporting countries, who are already subject to much higher tariffs and diversion of exports in many sectors is on the cards.
The writer is director general & CEO of Federation of Indian Export Organisations.
Disclaimer: Views expressed are personal and do not reflect the official position or policy of FinancialExpress.com. Reproducing this content without permission is prohibited.
