India’s Export Surge in 2023: Analysis and Future Trade Outlook

India’s exports have been on a rise, hitting a new high in 2023 at $770 billion, with a YoY growth of 13.84%. This is a significant increase from the previous year when the total exports were valued at $677 billion. Seventeen of the 30 key sectors showed positive growth, indicating a diversified growth across industries. The services sector has also remained robust, accounting for a major share of India’s exports.

The key sectors that contributed to the increase in exports include gems and jewelry, engineering goods, petroleum products, and chemicals. The gems and jewelry sector recorded a growth rate of 22.5%, followed by engineering goods with a growth rate of 20.5%. These sectors have been consistent performers and have been contributing significantly to India’s exports.

However, the global economic slowdown and trade tensions between major economies such as the US and China raise concerns about the sustainability of India’s export growth. The world economy is still reeling under the impact of the pandemic, and the supply chain disruptions have affected the demand for goods and services. The ongoing tensions between the US and China have also affected global trade, with the imposition of tariffs and sanctions impacting the export potential of many countries.

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The Indian government has taken steps to address these challenges and ensure that the export momentum continues. The introduction of the Production-Linked Incentive (PLI) scheme for select sectors, including textiles, automobiles, and electronics, is one such measure. The scheme provides incentives to companies to boost production and export of goods in these sectors.

The government has also focused on improving the infrastructure and logistics facilities to ensure faster and efficient movement of goods. The National Logistics Policy, launched in 2021, aims to reduce logistics costs and improve efficiency in the sector. The development of the Dedicated Freight Corridor and the Sagarmala project will also improve the connectivity and reduce the transportation costs.

Another significant step taken by the government is the launch of the Agriculture Infrastructure Fund (AIF), which provides financial assistance to farmers for various infrastructure development activities such as cold storage, warehouses, and food processing units. This will not only help in improving the agricultural supply chain but also increase the export potential of agricultural produce.

India’s export growth has been remarkable, and the government has taken measures to ensure that it continues. The diversification of exports across sectors and the focus on improving infrastructure and logistics facilities are positive steps towards boosting exports. However, the ongoing economic slowdown conditions across the world and the global trade tensions remain a challenge that needs to be addressed.

Market Overview

India’s overall exports have shown impressive growth in recent times, reaching a new high of US$ 770 billion in 2023, which is a 13.84% YoY increase. Despite the ongoing economic slowdown across the world, 17 out of the 30 key sectors exhibited positive growth, and services remained robust. The US continued to be India’s largest merchandise export destination, with exports worth US$ 78.31 billion, up over 2% from the previous financial year. However, the Netherlands emerged as India’s third-largest export destination with a 4.67% share in total exports during the fiscal year 2022-23. The country’s exports to the Netherlands increased from US$ 12.5 billion in FY ’22 to US$ 20.9 billion in FY23, indicating a 66.6% growth YoY, primarily due to the export of refined petroleum products to the European nation. Despite a 4% increase in goods imports from China to US$ 98 billion in FY 2022-23, its share in overall imports to India declined from 15.4% to 13.8%. Meanwhile, India’s top 10 markets accounted for 46.9% of its total merchandise exports.

Future trade outlook

The future trade outlook for India appears to be positive, despite potential challenges. The World Trade Organization has forecasted a 1.7% growth in global merchandise trade volume for 2023, which is slightly lower than the previous year’s 2.7% growth. However, it is expected to pick up again in 2024, with a projected growth of 3.2%. The manufacturing sector in India is expected to drive this growth, with greater exports anticipated in 2024-25, according to a report by the Asian Development Bank. The report also highlights the potential for contact-intensive sectors like tourism to boost the services export basket as pandemic fears recede. The Indian government’s Production-Linked Incentive (PLI) scheme is also expected to enhance the competitiveness of Indian players and expand their global footprint, particularly in sectors like electronics and solar panels. Despite the positive outlook, there are potential risks that could impact trade growth, including geopolitical tensions, food insecurity, potential financial instability, and increasing levels of debt. Therefore, it is important for India to remain vigilant and adapt to changing global conditions to maintain its momentum in exports.