Easing inflation in developed markets, a silver lining for exports in 2024

Easing inflation in developed countries, softening interest rates, a gradual pick up in global demand and other factors will provide a silver lining for the country's exports and the overall outbound shipments are expected to be more than USD 900 billion in 2024.

International trade experts have expressed hope that the services sector would perform better than merchandise and the country's overall outbound shipments may touch over USD 900 billion in 2024 against an estimated USD 764 billion in 2023.

A stable rupee against the US dollar, focus on new markets like Latin America and Africa, new items like mobiles and fresh fruits, focus on promoting e-commerce exports, and free trade agreements with the UAE and Australia would also help the country register healthy growth in outbound shipments next year.

Despite various challenges, including geopolitical tensions and China's subdued post-pandemic recovery, impacting exports this year, India's goods and services exporters have managed to tap opportunities in developed as well as developing economies.

The current year started with negative growth in exports, with the decline touching about 19 per cent in June but the decline narrowed down to 2.83 per cent in November 2023.

An official said goods exports rose 6.21 per cent in October "and going forward, this trend will continue in 2024 also and along with goods, services exports too are growing".

Electrical and electronics, machinery, automobile and auto components, high-tech products, pharmaceuticals, medical and diagnostic equipment exports are likely to go further in 2024.

Experts suggested focusing on new products and new destinations to give push to exports of goods and services.

"India's trade performance in 2024 will be influenced by a blend of domestic and international factors, set against a backdrop of global economic uncertainties. But as India's share in world trade is just 2 per cent, focus on enhancing sectoral competitiveness in labour-intensive sectors and diversification of services sectors can surprise us with some good export performance," think tank Global Trade Research Initiative (GTRI) Co-Founder Ajay Srivastava said.

He said India's trade scenario in 2023 mirrored the global trend, experiencing a 5.3 per cent fall in merchandise exports, aligned with a global 5 per cent decline as per UNCTAD (United Nations Conference on Trade and Development).

This decrease was notable despite the rupee's depreciation against the US dollar, which generally aids export competitiveness.

"The decline was particularly evident in labour-intensive sectors like textiles and leather. India's overall trade in 2023 remained at the same level as the previous year, indicating a need for strategic efforts to improve in 2024," Srivastava added.

Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said since inflation is moderating globally and after a pause in key rates by most of the central banks, interest rates are likely to move southward thus pushing demand.

"New orders with large volumes are expected in 2024, thus pushing our exports. We should look at goods and services exports of USD 900 billion-plus in 2024," Sahai said.

However, he added that the Red Sea problem might affect exports in the short run with a lack of container availability and rising freight costs.

"The freight to many destinations has almost doubled and we are apprehensive that they may remain at an elevated level in the next few months. A better trend of 2024 will be discernible by mid-March," Sahai said.

Lakshmi Venkataraman Venkatesan, Founding and Managing Trustee of Bharatiya Yuva Shakti Trust (BYST), an organisation that works for micro, and rural entrepreneurs from across the country, said the government had set the target of increasing MSME share in exports to at least 60 per cent in the next five years and this can be met by tapping into the potential in sectors like readymade garments, leather goods, processed foods, and engineering items for export to BRICS and G20 nations.

Trade expert and Hi-Tech Gears Chairman Deep Kapuria said new emerging sectors like mobile phones and electronics have contributed to India's export growth.

"However, the major challenge is to sustain this growth momentum. This is all the more important given the USD 2 trillion export target for both goods and services by 2030. Going forward, India needs to further step up its efforts to bring more products under Quality Control Order (QCOs) as this would enable our MSMEs to get integrated into Global Value Chains (GVCs), a major vehicle to boost exports," Kapuria said.

Mumbai-based exporter and Chairman of Technocraft Industries Sharad Kumar Saraf said order books are good at present as demand is gradually increasing from countries like the US and Europe.

The government has taken several measures to promote India's exports and including announcing new Foreign Trade Policy; promoting districts as export hubs; providing more funds to the Interest Equalisation Scheme on pre- and post-shipment rupee export credit; financial assistance under Trade Infrastructure for Export Scheme (TIES) and Market Access Initiatives (MAI) Scheme; and increasing role of Indian missions abroad.