From April-September 2022, India's merchandise exports stood at $ 231.88 billion, and imports totalled $ 380.34 billion. As per the World Trade Organization, growth in global merchandise trade volume is expected to slip to 1.0 percent this year (slowest since the initial COVID outbreak in 2020) from 3.5 percent in 2022.

Who is pulling down India’s exports? The global merchandise trade environment is looking sombre due to multiple shocks:

•The US: Aggressive monetary policy tightening would hit interest-sensitive spending in areas such as housing, motor vehicles and fixed investment.

•Europe: High energy prices stemming from the Russia-Ukraine war will raise manufacturing costs and squeeze household spending.

•China: Slowdown in real estate sector and COVID related uncertainty is weighing upon supply chains.

For India, the second half of FY23 started on a cautious note as far as external trade is concerned. While both exports and imports eased from their respective monthly peaks, the slowdown in exports is concerning.

•From its monthly peak of $ 42.4 billion in Jun-22, exports are down by ~30 percent to $ 29.8 billion in Oct-22.

•For the first time in 20-months, monthly exports fell below $ 30 billion in Oct-22.

•Exports posted their first annualized contraction (-16.7 percent YoY) in last 20-months.

The geopolitical distress led to an incremental rise in crude oil costs across the global chain. Due to the high crude oil prices and shortage of raw materials, the already pandemic-disrupted supply chains further convulsed. India is a major importer of crude oil, and an increase in oil prices leads to higher costs for Indian businesses and consumers. Last year’s Global Trade Research Initiative (GTRI) reported that India will pay $ 270 billion in crude oil and coal imports, which is about 40 percent of the total merchandise import bill. As oil prices rise, the cost of transportation, production, and the prices of goods also increase monumentally, leading to inflation and a drop in consumer demand.

While the challenges in front of the industry are growing, the right strategies can empower Indian traders to compete in the global market.

The government can advance Indian trade with the Union budget 2023 by concentrating on a few key areas. One such strategy would be to encourage MSMEs to create jobs along the supply chain to increase Indian commerce. While the government continues to encourage the export of goods, we must examine the budget for services. Government short-term export incentives are anticipated to be included in the budget. It is simple to bring fintech, data analytics, and a wide range of services to India, to boost the country's dollar billings.

These services include banking services, LPO (Legal Process Outsourcing), insurance, and think-tank services. If we look at the past 50 years, services exports have expanded more dramatically than exports of goods. Incentives or policy changes for the services sector must be considered in the budget to support its expansion.

Additionally, the government may assist Indian exporters of goods and services in establishing a safe presence in other countries by taking a number of measures to lessen the cost of compliance and regulatory intervention. Foreign trade agreements (FTAs) have the potential to completely transform the way exports are managed. There are currently programmes for individual exporters, but FTAs have the potential to have a substantial positive impact on countries. For instance, the trade deal between India and Australia, which went into effect last December, is predicted to strengthen labour-intensive industries and add 10 lakh new jobs to India. Exports from FTAs account for a considerable share of GDP in contrast to Vietnam.

India's FTP needs to be prepared to produce $ 1 trillion in exports to reach the lofty goal of being a $5 trillion economy

By exporting a project's worth of products and services, the government may provide Indian traders another way to make money. It has carefully chosen a variety of cutting-edge industries for PLI (Production Linked) incentives, including mobile phones, Advance Chemistry Cell (ACC) batteries, high-efficiency solar PV modules, drones, wearable technology, semiconductors, and specialty steel. These modern industries receive about 74 percent of government incentives, which would help India become a major manufacturing hub. A major issue for international businesses is a small pool of local suppliers, which results in more imports and unneeded bottlenecks. Increasing the number of suppliers and the rate at which supplies are purchased from India should strengthen the manufacturing ecosystem, increase the efficiency of the production chain, and position India as a worldwide leader.

Besides incentive-based schemes like PLI, the government should allocate more funds to upskilling and vocational training in the upcoming Budget 2023-24. This is required to further sharpen the skills needed for new-age sectors to drive the next leg of manufacturing growth.

Also, next Union Budget for 2023 need to include support measures like the elimination of power duty and easy access to loans. The addition of such measures will increase the nation's exports. Exporters claim that the finance ministry must give the Department of Commerce adequate funding for both the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme reimbursement and other activities, such as export promotion.

Concluding Remark
Our exports of products and services currently account for around 21.5 percent of our GDP in 2021–2022. Considering that exports often contribute 30 percent or more of the GDP in the majority of developing Asian nations, it is pitifully low. Many industries, including banking, shipping, insurance, and tourism, are supported by export. India's FTP needs to be prepared to produce $ 1 trillion in exports to reach the lofty goal of being a $5 trillion economy. However, increasing exports would necessitate a shift from the nation's existing protective position toward open trade.