What’s in the news?
- According to the Economic Survey 2021-22, tabled in Parliament by the Union Minister for Finance and Corporate affairs. Nirmala Sitharaman, India’s external trade recovered strongly in 2021-22 after the pandemic-induced slump of the previous year, with strong capital flows into India, leading to a rapid accumulation of foreign exchange reserves.
- It however cautions that the downside risks of global liquidity tightening and continued volatility of global commodity prices, high freight costs, coupled with the fresh resurgence of COVID-19 with the new variants may pose a challenge for India during 2022-23.
External trade performance:
- The survey states that owing to the recovery of global demand coupled with revival in domestic activity, India’s merchandise exports and imports rebounded strongly and surpassed pre-COVID levels during the current financial year.
- The USA followed by the UAE and China remained the top export destinations in April-November, 2021, while China, the UAE and the USA were the largest import sources for India.
- Despite weak tourism revenues, there was significant pickup in net services receipts during April-December, 2021 on account of robust software and business earnings, with both receipts and payments crossing the pre-pandemic levels.
- India’s merchandise exports have followed the global trend and during April – December 2021 the merchandise exports grew by 49.7%, compared to corresponding period of last year and 26.5% over 2019-20 (April-December).
- The Survey mentions that India has already attained more than 75% of its ambitious export target of US$ 400 billion set for 2021-22, and is well on the track to achieve the target.
- The Survey recommends that a push in the direction of Free Trade Agreements would help provide the institutional arrangements for India’s exports diversification.
- On the issue of merchandise imports, the Economic Survey states that India witnessed revival in domestic demand resulting in strong import growth.
- Merchandise imports grew at the rate of 68.9% in April-December, 2021 over the corresponding period of last year and 21.9% over April-December 2019, crossing the pre-pandemic level.
- The Survey indicates that there has been increased diversification of India’s import sources as reflected in the reduction of China’s share to 15.5% from 17.7% in the April–November period. The Survey indicates that merchandise trade deficit has increased to US$ 142.4 billion in April-December 2021.