Exports will remain one of the key drivers of India’s economic growth in 2023-24 and the coming budget will encourage imports of inputs rather than finished goods, incentivise value addition in the country, nudge businesses to explore new markets, boost services exports and provide a conducive policy environment to make India part of the global supply-chain for goods and services, two officials aware of the development said.
Union finance minister Nirmala Sitharaman on Thursday heard voices of stakeholders belonging to companies in both merchandise and services exports and assured them that she would address their concerns in order to facilitate the country’s exports, the two added, requesting anonymity. Both the government and the industry are concerned about the recent fall in exports due to a slowdown in major economies because of global headwinds, they said.
India’s merchandise exports in October declined by 16.65% to $29.78 billion; , however, overall goods exports in April-October saw a 12.5% growth to $263.35. According to commerce ministry’s data released on November 15, India’s overall exports– merchandise and services combined — in April-October is estimated at $444.74 billion, a 19.56% year-on-year growth.
The finance ministry, in its monthly economic review for October that was released on Thursday said: “A rapid deterioration in global growth prospects, high inflation, and worsening financial conditions have increased fears of an impending global recession. The spillovers of the global slowdown may dampen India’s exports businesses outlook; however, resilient domestic demand, a re-invigorated investment cycle along with strengthened financial system and structural reforms will provide impetus to economic growth going forward.”
The report, citing the International Monetary Fund’s (IMF) World Economic Outlook of October said: “The WEO has also projected growth in world trade volumes to slow down significantly from 4.3% in 2022 to 2.5% in 2023 while estimating that consumer price inflation will remain elevated through the rest of the year.” High inflation globally has triggered tightening of money flow and contraction of demand across the economies.
“ Budget 2023-24 will be prepared while factoring in the current global headwinds and demand slowdown. However, India has emerged as a reliable, destination of “friendshoring” for many advanced economies to minimise supply chain vulnerabilities. This is favourable for the Indian economy and the budget may consider this factor into account while pushing for growth,” one of the two officials mentioned above said. Friendshoring is the business strategy of running supply chains only through countries that are close allies, so as to avoid disruptions.
The finance minister, who is expected to present Union Budget for FY24 on February 1, 2023, is meeting stakeholders of various sectors to take their views before finalising budget proposals. On Thursday, she also met representatives of the social sector, including health, education, rural development, water and sanitation, virtually.
Federation of Indian Export Organisations (FIEO) president A Sakthivel, who was present in the pre-budget consultation meeting with the FM, said that the budget should focus on marketing Indian products and services to consolidate the country’s position in existing markets and to venture into new markets.
He said many countries, including India provide marketing support to small and medium enterprises (SMEs) but that India’s support under the Market Development Assistance (MDA) scheme is inadequate with a total allocation of less than ₹200 crore, for promoting merchandise exports to $460-470 billion. “There is a need for creation of an Export Development Fund with a corpus of minimum 0.5% of preceding year’s exports.”
PHD Chamber of Commerce and Industry (PHDCCI) president Saket Dalmia told the FM that India must take steps to reduce manufacturing costs to become globally competitive. “There must be focus on substantial reductions in the costs of doing business, especially at the MSME [micro, small and medium enterprises] level… Costs of doing business should not be more than those in the top three manufacturing countries namely China, United States and Japan,” he said, according to a statement.
Nilaya Varma, Co-founder and CEO of consultancy firm Primus Partners said: “One of the growth engines of any economy is exports. It is particularly important for a country like India, which has tremendous potential and strength in both merchandise and services exports. As the world is facing strong headwinds due to massive supply chain disruptions, it is looking at India with hope as a reliable and resilient trade partner.”