India's Exports and Imports

India's Merchandise Exports Overview (2018):

India, strategically located near major trading partners such as China, Pakistan, and Bangladesh, has a significant export presence in the global market. In 2018, the country exported goods worth US$323.1 billion, representing 19.1% of its gross domestic product (GDP). Geographically, nearly half (49.3%) of Indian exports went to Asian countries, followed by Europe (19.3%) and North America (18%).

Top Export Categories and Their Share: The highest-value export product groups and their respective shares in India's total exports are as follows:

1. Mineral Fuels Including Oil: $48.3 billion (14.9%)
2. Gems, Precious Metals: $40.1 billion (12.4%)
3. Machinery Including Computers: $20.4 billion (6.3%)
4. Vehicles: $18.2 billion (5.6%)
5. Organic Chemicals: $17.7 billion (5.5%)
6. Pharmaceuticals: $14.3 billion (4.4%)
7. Electrical Machinery, Equipment: $11.8 billion (3.6%)
8. Iron, Steel: $10 billion (3.1%)
9. Cotton: $8.1 billion (2.5%)
10. Clothing and Accessories (Not Knit or Crochet): $8.1 billion (2.5%)

Export Growth and Decline:

• The fastest-growing export category among the top 10 was Mineral Fuels Including Oil.
• Electrical Machinery and Equipment recorded a significant gain of 33.9%.
• Other notable growth categories include organic chemicals and machinery.
• Three categories experienced declines: iron and steel (-14.7%), clothing and accessories (-9.6%), and gems and precious metals (-5.8%).

Commodity-Wise Composition of Exports 2018-2019:

• Mineral fuels, including oil, showcased rapid growth.
• Electrical machinery and equipment experienced a remarkable gain of 33.9%.
• Organic chemicals recorded a substantial increase of 30.7%.
• Three categories faced declines: iron and steel (-14.7%), clothing and accessories (-9.6%), and gems and precious metals (-5.8%).

India's export dynamics highlight the country's strengths in diverse sectors, including fuel, gems, machinery, and pharmaceuticals, contributing significantly to its economic activity on the global stage.

India's Merchandise Imports Overview (2018):

India's imports in 2018 amounted to a total value of goods worth US$323.1 billion, representing a significant portion of the country's economic activity. The top 10 imports accounted for 80% of the overall value of product purchases from other countries.

Top Import Categories and Their Growth: India's highest-value import product categories and their growth rates in 2018 are outlined below:

1. Mineral Fuels Including Oil: $48.3 billion (37% YoY growth)
2. Organic Chemicals: $29.8 billion (29.8% YoY growth)
3. Electrical Machinery, Equipment: $25.6 billion (20.1% YoY growth)
4. Machinery Including Computers: (Exact figure not provided)

Declining Import Categories: Among India's imports, two categories experienced declines in 2018:

1. Animal and Vegetable Fats, Oils, and Waxes: Down by 14.4%
2. Gems and Precious Metals: Down by 12.6%

Comparison with Exports: It's noteworthy that while India's exports showed growth across several categories, imports also demonstrated an increase, particularly in mineral fuels, organic chemicals, and machinery. The growth in both exports and imports underscores the dynamic nature of India's trade activities on the global stage.

India's strategic location and diverse economic activities contribute to its robust participation in international trade, making it a key player in the global market.

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India's Trade Highlights for 2022-23:

1. US Emerges as Top Trading Partner:

• The United States has become India's largest trading partner in 2022-23.
• Bilateral trade between India and the US increased by 7.65% to USD 128.55 billion compared to USD 119.5 billion in 2021-22 and USD 80.51 billion in 2020-21.
• The surge in trade since 2020 is notable, indicating strengthening economic ties.

2. Growth Trends:

• India's exports grew by 2.81% to reach $78.31 billion, while imports surged by nearly 16% to $50.24 billion.
• The trade surplus stood at over $28 billion in the last fiscal year.

3. Changing Goods Buyers:

• Netherlands emerged as the third-largest goods buyer, displacing China to the fourth position in 2022-23.

4. Key Export Markets:

• Bangladesh and Hong Kong remained in India’s top 10 export markets.

5. Trade Deficit with China:

• While China has been a significant trading partner, India's deficit with China widened.
• Exports to China declined by about 28% to $15.32 billion, while imports rose by 4.16% to $98.51 billion.

6. Historical Context:

• China was India's top trading partner from 2013-14 to 2017-18 and also in 2020-21.
• The UAE was India's largest trading partner before China.

7. Positive Impact on India:

• The US is one of the few countries with which India maintains a trade surplus, contributing to improved foreign exchange reserves.
• Increased exports of pharmaceuticals, gems, and jewellery have played a role in enhancing India's shipments to the US.
• Global firms are reducing dependence on China, leading to increased business diversification into countries like India.
• India's participation in the US-led Indo-Pacific Economic Framework (IPEF) is expected to further boost economic ties.

8. Significance of US-India Trade:

• The US has consistently been India’s largest market for services exports.
• Recent overseas sales of merchandise goods to the US overtook China, solidifying the US-India trade relationship.

Government Interventions to Boost Exports and Address Trade Deficit:

1. Extension of Foreign Trade Policy (2015-20):
• The policy has been extended up to 31-03-2023, providing a framework for increasing exports, generating employment, and enhancing value addition.
2. Extension of Interest Equalization Scheme:
• The Interest Equalization Scheme on pre and post shipment rupee export credit has been extended up to 31-03-2024, supporting exporters with credit assistance.
3. Assistance through Export Promotion Schemes:
• Various schemes like Trade Infrastructure for Export Scheme (TIES) and Market Access Initiatives (MAI) Scheme are in place to promote exports and facilitate market access.
4. Rebate of State and Central Levies and Taxes (RoSCTL) Scheme:
• Implemented since 07.03.2019, this scheme aims to promote labour-oriented textile exports by providing rebates on state and central levies and taxes.
5. Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme:
• Implemented since 01.01.2021, the RoDTEP scheme focuses on remitting duties and taxes on exported products to enhance export competitiveness.
6. Common Digital Platform for Certificate of Origin:
• Launched to facilitate trade, this platform aims to increase Free Trade Agreement (FTA) utilization by exporters by providing a streamlined process for the Certificate of Origin.
7. Districts as Export Hubs Initiative:
• The initiative identifies products with export potential in each district, addresses bottlenecks in exporting these products, and supports local exporters and manufacturers. The goal is to generate employment at the district level.

Trade Basics:

• Trade Surplus:
• Definition: A positive balance of trade where a country's exports exceed its imports.
• Significance: Indicates economic strength, as the country is earning more from exports than spending on imports.
• Trade Deficit:
• Definition: Occurs when a country's imports exceed its exports.
• Implications: Puts a strain on foreign exchange reserves and contributes to balance of payments challenges.
• Challenges: Can impact economic stability and sustainability, requiring strategies to address the deficit.

These government interventions aim to enhance India's export competitiveness, support key sectors, and contribute to economic growth while managing trade imbalances.

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Trade Trends with China:

Despite being one of the top trading partners, India has experienced certain trade trends with China, including a widening trade deficit. Here are key observations:

1. Decline in Exports to China:
• Exports to China experienced a significant decline, dropping by about 28 percent to $15.32 billion in the fiscal year 2022-23.
2. Increase in Imports from China:
• Imports from China, on the other hand, saw a rise of 4.16 percent, reaching $98.51 billion in the same fiscal year.
3. Overall Trade Performance:
• From April 2022 to March 2023, India's overall trade with China declined by 1.5 percent, totaling $113.83 billion.
4. Widening Trade Deficit:
• Despite the decline in overall trade, the trade deficit widened from $72.91 billion in 2021-22 to $83.2 billion in the last fiscal year.
5. Trade Deficit Impact:
• A trade deficit occurs when a country's imports surpass its exports, putting strain on foreign exchange reserves and contributing to balance of payments challenges.
6. China as a Key Trade Partner:
• Despite the challenges, China remains India's second-largest trade partner, highlighting the significance of the economic relationship between the two countries.

Note: India's trade dynamics with China play a crucial role in shaping its economic landscape, and efforts may be needed to address the trade deficit and ensure a balanced economic relationship between the two nations.

India’s Export Outlook:

In recent years, India has witnessed significant growth in exports, driven by robust manufacturing across various sectors and supportive government policies. Here are key points outlining India's export outlook:

1. Record-High Merchandise Exports:
• In the financial year (FY) 2022, India achieved a milestone with merchandise exports reaching a record high of US$417.81 billion. This exceeded the government's target of US$400 billion.
2. Export Growth Drivers:
• The growth in exports was fueled by increased demand for various products, including petroleum, cotton yarn, textiles, chemicals, and engineering goods.
3. Future Export Target:
• The government has set an ambitious export target of US$450 billion for FY 2023, indicating optimism about sustained export growth.
4. Leading Export Destinations:
• Key export destinations for India include the United States, UAE, Netherlands, China, Bangladesh, Singapore, Brazil, UK, Saudi Arabia, Indonesia, Germany, Hong Kong, and others.
5. Top Export Categories:
• India's top exports encompass a range of goods, with engineering goods, gems and jewelry, petroleum products, drugs and pharmaceuticals, organic chemicals, and electronic goods being prominent.
6. Import Composition:
• India's import basket is characterized by items such as petroleum and crude products, electronic goods, gold, machinery and electrical appliances, pearls, stones and semi-precious metals, and transport equipment.
7. Diversification of Trade Partners:
• India's export strategy involves engaging with diverse trade partners globally, fostering economic ties with countries across different regions.
8. Key Sectors Driving Exports:
• Sectors such as pharmaceuticals, textiles, engineering, and information technology contribute significantly to India's export performance.
9. Global Economic Dynamics:
• The outlook for India's exports is influenced by global economic conditions, trade policies, and geopolitical factors.

India's vibrant export landscape, coupled with strategic initiatives and a diverse range of export products, positions the country as a key player in the global trade arena. Continued efforts to enhance competitiveness and address trade challenges will play a crucial role in sustaining export momentum.

Export Promotion Measures by the Government:

1. Foreign Trade Policy (FTP):
• A roadmap for achieving US$2 trillion in exports (goods and services) by 2030.
• Focus on new and developing trade-related fields, including e-commerce.
2. Interest Equalization Scheme (IES) on Rupee Export Credit:
• Provides benefits to eligible exporters for pre- and post-shipment rupee export credit.
• Aims to enhance international competitiveness and improve export performance.
3. Trade Infrastructure for Export Scheme (TIES):
• Assists in creating infrastructure for export growth.
• Covers projects with export linkages, such as border haats, customs stations, labs, cold chains, SEZs, and cargo terminuses.
4. Market Access Initiatives (MAI) Scheme:
• Focuses on sustained promotion of India's exports.
• Adopts a product-country approach for market-specific strategies.
5. Rebate of State and Central Levies and Taxes (RoSCTL) Scheme:
• Implemented since March 2019 to promote labor-oriented textile exports.
6. Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme:
• Tax neutralization scheme to refund central, state, and local duties or taxes to exporters.
• Replaces the Merchandise Export from India Scheme (MEIS) to comply with WTO rules.
7. Common Digital Platform for Certificate of Origin (CoI):
• Single access point for CoI issuance for all FTAs and PTAs, promoting secure, electronic, paperless processes.
8. Champion Service Sectors:
• Identifies 12 champion service sectors for diversifying services exports, including IT/ITES, tourism, medical value travel, logistics, legal services, and education.
9. Districts as Export Hubs:
• Identifies products and services with export potential in all districts, promoting clusters like GI products, agriculture, and toys.
10. Production-Linked Incentive (PLI) Scheme:
• Rolled out in 14 sectors since 2020 to develop India into a global manufacturing hub.
• Incentives totaling INR 1.97 trillion (US$23.81 billion) to boost domestic manufacturing and exports.

These initiatives collectively contribute to enhancing India's export capabilities, promoting economic growth, and positioning the country as a significant player in the global trade landscape. The focus on diverse sectors and strategic measures align with the broader goal of making India a key participant in the global value chain.

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National Logistics Policy (NLP):

The National Logistics Policy (NLP) has been introduced to enhance the global competitiveness of Indian exports. Key features of the policy include:

1. Seamless Integration:
• Aims for the seamless integration of multiple transportation modes.
• Utilizes technology, streamlined processes, and skilled manpower.
2. PM GatiShakti National Master Plan:
• Aligns with the PM GatiShakti National Master Plan.
• Focuses on infrastructure development and efficient transportation networks.
3. Boost to Logistics Sector:
• Expected to provide a significant boost to India's US$200 billion logistics sector.
• Facilitates the smooth movement of goods both domestically and internationally.
4. Foreign Direct Investment (FDI) Policy:
• The FDI policy is aligned with the NLP objectives.
• The federal government has approved 100 percent FDI under an automatic route in many sectors to support Indian exports.

The National Logistics Policy is a strategic initiative to transform and optimize India's logistics ecosystem, fostering efficiency and competitiveness in the movement of goods. The integration of transportation modes and the focus on technology are instrumental in making logistics more agile and responsive to the needs of global trade. Additionally, the supportive FDI policy aligns with the overall goal of enhancing India's position in the global marketplace.

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Services Sector Exports:

India's services sector plays a significant role in the global market, contributing 3.35 percent to the world's services exports in 2016-17. Key points regarding India's services sector exports include:

1. Contribution to Global Exports:
• The services sector's contribution to global exports is valued at $160 billion plus.
• This contribution is twice that of India's merchandise exports, which constitute 1.65 percent of the world's merchandise exports.
2. Dominant Sectors:
• India's services exports are led by the software sector, accounting for more than 45 percent of the total.
• Other significant contributors include business services (20 percent), travel services (14 percent), and transportation services (10 percent).
• Additional services, such as financial, insurance, and communication services, also play a role.
3. Potential for Growth:
• With increasing global demand for Indian services and sustained government support, there is potential for services exports to reach $300 billion by 2022.
• India emphasizes the inclusion of services in global and regional trade talks, recognizing the sector's growth potential.
4. Technological Connectivity:
• Traditionally considered non-tradable, non-transportable, and non-scalable, the services sector has undergone a transformation with technological advancements.
• Digitalization has enabled the scalability and tradability of services, making them increasingly relevant in global trade negotiations.

India's services sector, driven by IT and software services, has become a key player in the international market. As technological connectivity continues to evolve, the services sector's role in global trade negotiations is expected to expand further, contributing significantly to India's export landscape.

Steps to Boost Services Exports:

Boosting services exports is crucial for India's economic growth. Here are some steps that can be taken to enhance services exports:

1. Identifying Export Destinations:
• Provide assistance to service providers in identifying potential export destinations.
• Conduct market research to understand the demand for specific services in different regions.
2. Building Brand India:
• Assist in creating a strong "Brand India" image for services.
• Offer financial support for showcasing Indian services in foreign exhibitions through schemes like the Market Development Assistance Scheme.
3. Addressing Visa Issues:
• Resolve issues affecting services exports, such as challenges related to the H-1B visa in the United States.
• Engage in diplomatic efforts to ease visa restrictions and enhance the mobility of skilled professionals.
4. Information Dissemination:
• Ensure that comprehensive and accurate information on regulations and standards of importing countries is readily available to services exporters.
• Provide this information in reader-friendly terms to facilitate better understanding and compliance.
5. Strengthening Commercial Diplomacy:
• Indian embassies should play an active role in strengthening commercial diplomacy.
• Act as facilitators for services exporters, addressing challenges and promoting Indian services on the global stage.
6. Government and Industry Collaboration:
• Encourage collaboration between the government and the Services Export Promotion Council to address industry-specific challenges.
• Foster a supportive ecosystem for services exporters through regular dialogue and policy interventions.
7. Skill Development:
• Invest in skill development programs to enhance the capabilities of the workforce in service sectors, making them more competitive globally.
8. Digital Promotion:
• Leverage digital platforms for the promotion of Indian services.
• Utilize online channels and social media to showcase the capabilities and quality of services offered by Indian businesses.
9. Incentivizing Innovation:
• Introduce incentives to encourage innovation in service delivery, making Indian services stand out in terms of quality and uniqueness.

By implementing these steps, India can create an environment conducive to the growth of services exports, thereby contributing significantly to the overall economic prosperity of the country.

Champion Services Sectors:

In 2018, the Indian government identified twelve sectors, referred to as "Champion Sectors," to receive focused attention and development support. These sectors play a crucial role in the country's economic growth and are targeted for specific initiatives to unlock their full potential. Here are the Champion Services Sectors:

1. Information Technology & Information Technology-enabled Services (IT&ITeS):
• Focus on software development, IT services, and technology-enabled solutions.
2. Tourism and Hospitality Services:
• Develop and promote India as a major tourist destination, emphasizing hospitality services.
3. Medical Value Travel:
• Enhance India's position as a hub for medical tourism, providing high-quality healthcare services.
4. Transport and Logistics Services:
• Improve infrastructure and efficiency in transportation and logistics to support trade and commerce.
5. Accounting and Finance Services:
• Strengthen financial services, including accounting, auditing, and financial advisory.
6. Audio Visual Services:
• Promote India's capabilities in the audio-visual sector, including film and entertainment.
7. Legal Services:
• Enhance the legal services sector, providing legal expertise and support.
8. Communication Services:
• Develop and expand communication services, including telecommunications and media.
9. Construction and Related Engineering Services:
• Support the growth of the construction and engineering services industry.
10. Environmental Services:
• Focus on services related to environmental sustainability and conservation.
11. Financial Services:
• Strengthen and diversify financial services, including banking, insurance, and investment.
12. Education Services:
• Promote India as a destination for quality education services, including higher education and skill development.

Key Objectives and Targets:

1. Global Services Exports Share:
• Increase India's share in global services exports from 3.3% in 2015 to 4.2% by 2022.
2. Contribution to Gross Value Added (GVA):
• Raise the contribution of services to Gross Value Added (GVA) from 55% to 60% by 2022.
3. Dedicated Fund:
• Establish a dedicated fund of ₹5,000 crores to support initiatives and action plans for the Champion Sectors.

Expected Outcomes:

The Champion Services Sectors initiative is expected to:

• Enhance competitiveness in service exports.
• Contribute to GDP growth.
• Generate foreign currency earnings.
• Create employment opportunities in India.

This focused approach aims to propel these sectors to new heights, fostering economic development and global recognition.

WTO, GATS, and India:

The General Agreement on Trade in Services (GATS) under the World Trade Organization (WTO) is a framework that addresses international trade in services. GATS classifies globally traded services into four modes based on their nature. India has identified advantages in Mode 2 (consumption abroad) and Mode 3 (commercial presence). Here are some considerations and potential strategies for India within the context of GATS:

1. Mode 2 Services (Consumption Abroad):
• Includes tourism, education, health, and similar services where foreigners visit India for consumption.
• India's potential in Mode 2 services can be leveraged for economic benefits.
2. Tourism and Foreign Tourists' Arrival:
• India's share of the world's foreign tourists' market is relatively low, indicating untapped potential.
• Formulating a long-term plan to attract a greater number of foreign tourists is crucial.
• Proposed steps may include extending the list of countries eligible for visa on arrival and liberalizing business immigration regulations.
3. Expansion of Healthcare Services:
• India has established itself as a center for low-cost, quality healthcare, serving a significant number of foreign patients.
• There is an opportunity to expand healthcare services to border areas, such as the Northeast, to tap into the high level of education in those regions.
• Becoming a global health hub requires strategic planning and infrastructure development.
4. Raise Standards of Indian Academic Institutions:
• Education is a significant services export sector globally, and India has numerous higher educational institutions.
• To attract more foreign students, there is a need to raise the standards of Indian academic institutions.
• FDI policies can play a crucial role in attracting foreign students and retaining them in the country.

Overall Recommendations:

1. Strategic Planning:
• Formulate a comprehensive and long-term strategy for each identified service sector to maximize benefits under GATS.
2. Infrastructure Development:
• Invest in infrastructure development to support the expansion of services, such as healthcare facilities in border areas.
3. Policy Reforms:
• Implement policy reforms, including liberalizing visa regulations and business immigration, to encourage foreign participation in Indian services.
4. Quality Improvement:
• Focus on improving the quality and global ranking of educational institutions to attract more foreign students.
5. Global Collaboration:
• Explore opportunities for global collaboration and partnerships in service sectors to enhance India's competitiveness.

By strategically aligning policies and making targeted investments, India can capitalize on its advantages in services trade, contributing to economic growth and global recognition.

WTO, GATS, and India: Mode 3 Service

Understanding Mode-3 Service (Commercial Presence):

Under the General Agreement on Trade in Services (GATS) of the World Trade Organization (WTO), Mode 3 refers to 'commercial presence.' In this mode, a country's service providers establish a physical presence, such as branches or subsidiaries, in another country to provide services.

Opportunities for Indian Companies in Mode 3 Service:

1. Global Presence in Specific Sectors:
• Indian companies have already established a global presence, particularly in information and communication technology (ICT) and business services.
• However, there is significant untapped potential for expansion into sectors like finance, banking, insurance, legal, accounting, and education.
2. Scope for Expansion:
• With skilled professionals in tourism and healthcare, government initiatives like Smart Cities and Digital India, and a robust health sector offering affordable world-class treatment, India has the potential to expand its global operations.
• Vibrant tourism opportunities and the global presence of Indian companies in various sectors provide a favorable environment for expansion.

Achieving the $300 Billion Services Exports Target:

1. Strategic Initiatives:
• Leverage the government's initiatives, including Smart Cities, Digital India, and Skill India, to create a conducive environment for service exports.
• Focus on sectors with commercial presence potential, aligning with India's strengths in skilled professionals and diverse services.
2. Promoting Key Sectors:
• Encourage and support Indian companies in expanding their global presence in finance, banking, insurance, legal, accounting, and education.
• Foster collaboration between government agencies and private enterprises to facilitate global expansion.
3. Utilizing Skilled Workforce:
• Leverage the availability of skilled professionals in tourism and healthcare to enhance India's commercial presence in these sectors globally.
4. Job Creation and Economic Impact:
• Achieving the $300 billion services exports target by 2022 will not only establish India as a significant center for services exports but also create millions of jobs, contributing to economic growth.

Conclusion:

India's potential in Mode 3 services presents a valuable opportunity for the country to diversify and strengthen its global service offerings. By strategically expanding into key sectors and aligning with government initiatives, India can achieve its ambitious services exports target and solidify its position in the global services market.

Trade Facilitation Initiatives by Customs: Boosting Trading Across Borders

Introduction: Trading Across Borders is a crucial component of the World Bank's assessment, measuring the efficiency of clearing imported and exported goods in terms of time and cost. India has made notable progress in this parameter, attributed to a series of reforms undertaken by Customs in collaboration with various stakeholders.

Key Initiatives and Reforms:

1. Collaborative Approach:
• Customs has fostered enhanced coordination with ministries and stakeholders, including importers, exporters, Customs Brokers, CFS operators, shipping lines, and Terminal Operators.
• A collaborative effort ensures a holistic approach to trade facilitation, addressing challenges from multiple perspectives.
2. Digitization and Technology Integration:
• Extensive use of digitization and new technologies has been a focal point of Customs initiatives.
• Leveraging digital platforms and technology streamlines processes, reduces paperwork, and enhances the overall efficiency of trade-related activities.
3. Business Process Re-engineering:
• Customs has undertaken business process re-engineering, optimizing and redesigning processes to eliminate bottlenecks and enhance the overall efficiency of trade operations.
• Streamlining procedures ensures a smoother flow of goods across borders.
4. National Trade Facilitation Action Plan:
• Customs has developed and implemented a National Trade Facilitation Action Plan, providing a roadmap for fulfilling India's commitments under the Trade Facilitation Agreement of the WTO.
• The plan outlines strategic measures to enhance trade facilitation and reduce complexities in the import and export processes.
5. SWIFT - Customs Single Window:
• Introducing SWIFT, a Customs Single Window, is a transformative step in unifying the entire clearance process on a single digital platform.
• The Customs Single Window streamlines documentation, reduces redundancy, and creates a more efficient and transparent trade environment.

Positive Impact and Recognition:

India's positive performance in the Trading Across Borders parameter in the World Bank's Doing Business report reflects the effectiveness of these initiatives. The notable improvement signifies a commitment to creating a more business-friendly environment and fostering international trade.

Conclusion:

Customs' proactive approach, embracing technology, collaboration, and systematic reforms, has significantly contributed to India's positive rank in Trading Across Borders. These initiatives not only enhance efficiency in trade operations but also position India as a competitive player in the global trade landscape.